Five London-based local government pension schemes hired bfinance and JLT Employee Benefits to assist in a search for private debt managers to run about £250 million ($349 million).
A document related to a meeting of the pension committee for the £1.2 billion London Borough of Ealing Pension Fund — which is leading the process — said executives had made arrangements to allocate 5% of the portfolio to private debt, with a view to appointing a manager in the second quarter this year. That equates to about £60 million with initial investments funded out of cash reserves.
"To achieve this, Ealing Pension Fund have agreed to collaborate though leading the search along with four other London boroughs … known as the founding funds, to conduct a tender for private debt investment managers with a view to collectively investing an estimated initial £250 million. There remains an option for other LGPS funds to join the investment at a later stage," the document said.
The other pension funds are the £2.2 billion Wandsworth Council Pension Fund, London; £1.3 billion London Borough of Lambeth Pension Fund; £671 million London Borough of Havering Pension Fund; and £650.5 million London Borough of Merton Pension Fund.
All five pension funds are part of the London Pension Collective Investment Vehicle, a pooled arrangement, which has not yet launched a private debt investment program.
JLT Employee Benefits is working on the design of the allocation, and bfinance was hired to conduct manager search and selection for the allocation.
The Ealing document said JLT is acting as a strategic consultant for the procurement process, providing a consolidated search specification for the five founding funds and consulting on the RFP document and finalists.
bfinance will provide a "thorough and tailored analysis of the proposals received in the tender process to enable fully informed decisions to be taken."
"The key drivers for investing in private debt (are) to diversify the fund's source of returns and increase the fund's exposure to assets that derive that majority of their returns from income as opposed to capital growth," said Bridget Uku, group manager treasury and investments at the London Borough of Ealing Pension Fund, in a news release from bfinance. "The fund has benefited from its sizable equity exposure, and on the back of these strong returns it agreed to reduce this exposure and use the proceeds to invest into an asset class where the expected total returns still look attractive relative to many other asset classes."
Spokesmen for the Ealing Council could not be reached for comment.