Nottinghamshire reviews local property investment portfolio

The Nottinghamshire Pension Fund is to review its local property investment portfolio due to underperformance and a lack of scale.

At a meeting of the pension fund’s committee last month, councillors agreed that the Local Property Investment Fund – set up in 2014 – would be amalgamated into the main investment portfolio.

Abrdn Asset Management, the appointed manager of the property fund, told councillors that the fund had underperformed the main portfolio over “all timeframes” and had relatively high management costs.

Abrdn also highlighted that its team was unable to diversify the portfolio sufficiently due to its size and concentration risk. As a result, single assets or tenants could have a significant impact on performance and Abrdn was unable invest in some sectors.

The asset manager added that raising the environmental, social and governance credentials of assets in the Local Property Investment Fund would also be “sizeable” compared to the size of the portfolio.

The committee now plans to move the fund’s assets into Nottinghamshire’s main investment portfolio, while Abrdn will conduct a review of each asset to determine whether they fit with the portfolio’s objectives. It will also assess the pension fund’s other investments within the region covered by its pool, LGPS Central.

The council document stated: “Over time it is anticipated that the strategic management of the properties in one fund should drive improved investment returns and management efficiencies.”

The Nottinghamshire Pension Fund reached £7.3bn in assets under management at the end of September 2024, according to its latest quarterly update.

In its 2023-24 annual report, the pension fund reported an allocation of approximately 10.3% of the total portfolio.

LGPS Central launched a UK property fund in 2023, seeded by Nottinghamshire and Leicestershire pension funds. It has also set up a UK residential property investment vehicle.