LGPS Central backs M&G real estate debt fund with £200 million

LGPS Central has committed £200 million to a new real estate debt fund managed by M&G Investments.

The local government pension scheme pool for the Midlands region has invested in the latest closed-end fund from M&G’s Real Estate Debt series. Other investors, including an unnamed large insurer, helped the fund reach £350 million at its first close.

Nadeem Hussain, head of private markets at LGPS Central Limited, said: “This investment plays an important role in fulfilling our long-term obligations and objectives and we very much look forward to working closely with M&G’s Real Estate Finance team in the future. Their approach to constructing portfolios and experience in managing this attractive asset class is a key driver of our partnership.”

In a statement announcing the cornerstone investments, M&G said that increased participation from institutional investors in the real estate debt market had led to alternative lenders making up approximately 39% of outstanding debt in the UK and 10-15% in continental Europe.

Grant Hadland, head of UK institutional distribution at M&G Investments, said: “For those pension funds and institutional investors that can withstand reduced liquidity, certain parts of the private markets universe still offer the potential to lock-in higher returns that typically come with lower volatility.”

As of the end of March 2023, LGPS Central managed £26.4 billion. Approximately 10% of this was allocated to debt securities other than Gilts and corporate bonds, according to the pool’s latest annual report.

LGPS Central recently announced that Royal Mail Pension Plan CEO Richard Law-Deeks would take over as its chief executive later this year.

Nadeem Hussain has also been appointed head of private markets, having joined the pool in 2020.