Border to Coast introduces two innovative real estate funds, unveiling added advantages of pooling

The largest Local Government Pension Scheme pool in the UK, Border to Coast Pensions Partnership, has unveiled two new real estate funds, commencing with an initial investment of £870 million. With expectations of additional future commitments, the funds have the potential to exceed £1 billion in size.

The “Global Core” and “Global Value-Add” funds address partner funds’ interest in global real estate investment, leveraging the advantages of pooling. This encompasses increased investment control, an improved strategy for responsible investing, and reduced costs.

Chief Investment Officer at Border to Coast, Joe McDonnell, said: “With the launch of these funds, Border to Coast can offer our partner funds investment opportunities across the suite of typical pension scheme asset classes. These two global real estate funds provide partner funds with the flexibility to set a bespoke risk adjusted return profile for global real estate and invest accordingly.”

The £500 million Global Core Fund offers exposure to real estate investments aiming for a predominantly income-driven return profile, serving as an additional means for partner funds to generate investment income. The initial stage of the Core Fund involves transferring legacy allocations from participating partner funds, a process estimated to span about two years. Subsequently, the open-ended fund will be available for annual subscriptions from all partner funds.

The £370 million Global Value-Add Fund pursues a primarily capital appreciation return, allowing partner funds to explore supplementary returns that complement and diversify their existing portfolio of growth assets. The fund has an initial three-year investment period with commitments to investee funds.

Alistair Smith, Head of Real Estate at Border to Coast, said: “These two new funds are the result of detailed collaboration with our Partner Funds and extensive preparation by our expert in-house team. It’s tremendously exciting to be able to offer new investment opportunities and a new asset class for our customers.”

As a committed long-term investor, environmental, social, and governance factors (ESG) are fully integrated into the investment process for both funds. This entails conducting thorough due diligence and evaluating various ESG factors before making investments. Progress is monitored annually, and engagement with managers is employed to encourage improvements.