London Borough of Hammersmith & Fulham Pension Fund hired Alpha Real Capital for an index-linked income fund, the pension fund and manager confirmed in a joint news release Monday.
The £1.2 billion ($1.6 billion) pension fund is allocating 5% of its total portfolio to Alpha Real's Index Linked Income Fund, which invests in U.K. commercial rental properties.
The LBHF Pension Fund is managed by the Hammersmith & Fulham Council for members of the local government pension scheme.
Phil Triggs, director of treasury and pensions, said in the news release that Alpha Real has a strong track record of delivering consistent inflation-linked returns and robust capital deployment.
Boris Mikhailov, head of client solutions at Alpha Real, said in the same news release that commercial rental income provides pension funds "very long-dated inflation-linked, investment-grade quality cash flows to help meet liabilities whilst also generating 4% to 5% p.a. (per annum) more than comparable index-linked gilts. We see it as a natural asset class for local government pension schemes — they have a long-term investment perspective and can take advantage of private markets opportunities."
In June, Hammersmith & Fulham Pension Fund invested £30 million in a U.K. affordable housing fund managed by Man Group.