Four London boroughs have invested a combined £308m in a new fixed income fund launched by the London Collective Investment Vehicle (LCIV).
LCIV’s Multi Asset Credit (MAC) fund brings the total assets supervised by the investment manager to £15bn, more than 40% of pension fund assets controlled by London boroughs.
Larissa Benbow, LCIV’s head of fixed income, said the MAC fund would allow access to investments opportunities London boroughs have previously not had.
“The LCIV MAC fund offers London local authorities an excellent and cost-efficient way to access a broad range of credit strategies in a single product,” said Benbow.
“This will not only allow them to diversify their portfolios in times of greater market uncertainty but also to gain exposures into investments such as loans and other credit opportunities, which not all boroughs have historically had access to.”
Room151’s Annual Conference: 10th LATIF & FD’s Summit
All initial capital intended for LCIV’s MAC fund will invest in the CQS Credit Multi Asset Fund.
The four participating London boroughs have not been named.
LCIV is working on additional fixed income investment options including global bonds, private debt, liquid loans and “long/short MAC”. Capital raised for these projects may be allocated to CQS but also other providers.
Last year LCIV published a paper on the need for fixed income investment opportunities among LGPS funds to meet the growing “cashflow challenge” of making benefits payments.
The paper outlined options to be explored and difficulties in finding investment managers with a suitable off-the-shelf product. At the heart of the issue was LCIV’s need for the product to be “open architecture”.
In a 2016 document LCIV wrote: “The Local Government Pension Schemes, in common with many pension funds across the globe, require structurally higher cashflows than in the past.
“This secular change will require a structural re-weighting towards fixed income products, at a time when traditional fixed income products can no longer deliver the returns and outcomes that the pension funds require.
“Collaboration through the CIV can increase the chance of meeting the cashflow requirements, as the scale of assets will enable the CIV to seek bespoke structured solutions which would likely not be economic for the boroughs on a stand-alone basis.”
In April LCIV launched a sustainable equity fund with combined investments of £246m, including £66m from the London Borough of Merton.
