Kensington and Chelsea Pension Fund, London, increased its strategic allocation to real estate to 20% of total assets from 5%, said Quentin Marshall, chairman of the investment committee.
The pension fund, which has £1.5 billion ($1.9 billion) in assets, is aiming to build a £300 million real estate portfolio, which will be made up of directly owned commercial real estate in the U.K.
Mr. Marshall said in an emailed comment that the pension fund's decision was motivated by ambitions to diversify its portfolio and reduce the risk of the portfolio, as well as other factors such as CPI-linked inflation protection and rental income.
"The committee, with advice, has decided to invest in property to diversify its asset base and provide a steady income stream. The investments made previously have led to us having the best funded pensions scheme in the country, providing stability for our pensioners and employees," Mr. Marshall said.
The pension fund now has a strategic asset allocation of 70% global equities, 20% real estate, 5% private equity and 5% index-linked gilts.
The pension fund is part of local government pension scheme pool London CIV. Mr. Marshall said the pension fund is not investing in real estate through the pool because it doesn't offer commercial real estate strategies.