Teesside pension fund hires CBRE to manage real estate portfolio increase
EUROPE - Teesside pension fund has hired CBRE to manage the expansion of its £107m (128.5m) direct portfolio as part of a three-year plan to increase its overall real estate allocation from 6.5% to 10%.
Fred Green, head of investments at Middlesbrough local authority, which manages the £2.4bn scheme, told IP Real Estate the 3.5% increase could include both direct and indirect investments but would primarily focus on direct because of it offered exposure to the UK market.
The direct portfolio currently makes up 4% of the scheme's overall real estate allocation.
"We're unusual for a pension fund in that we have a high weighting to growth assets - equities, property and alternatives - and a low weighting to protective assets such as bonds," said Green.
The Teesside scheme has less than 10% of its portfolio allocated to gilts.
"We'd rather invest in growth assets, especially as gilt yields have been depressed by quantitative easing," Green said.
"Some alternatives we don't like - we don't invest in hedge funds, for example - but some we do. There is a play-off between risk and reward in any asset class."
Apart from the property allocation, the pension fund is internally managed, which Green said gave it a strong appreciation of the risks of investing in all asset classes.
Under the terms of the non-discretionary mandate, CBRE will advise the investment panel on the construction of the directly invested portfolio, as well as manage rent negotiations and leases.
CBRE's appointment is a result of a competitive tender announced last September after incumbent LVAM announced its merger with Threadneedle.