Kensington and Chelsea bucks trend in boosting property assets

Kensington and Chelsea Pension Fund has increased its strategic allocation to real estate to 20% of total assets, a quadrupling of its previous 5% position.

The £1.5 billion fund intends to build a £300 million real estate portfolio, made up of directly owned commercial real estate in the UK.

The fund’s decision is designed to diversify and reduce the risk of the portfolio, in addition to delivering CPI-linked inflation protection and rental income.

The fund now has a strategic asset allocation of 70% global equities, 20% real estate, 5% private equity and 5% index-linked Gilts.

While local authorities were banned from investing in property, pension funds face no such restrictions. Yet Kensington & Chelsea’s decision comes at a time when many funds are seeking to get out of commercial property investments.

The fund has a track record of setting its own agenda. Early this year, it announced its intention to withdraw from the London CIV pool – a decision that was later abandoned after reaching agreement with the pool.

The property investment was not made through London CIV because commercial real estate strategies are not offered via the pool.