London Pension Fund Authority Puts Commitments On Hold

The £3.2 billion ($5.2 billion) London Pension Fund Authority has put new fund commitments on hold until distributions from its private equity portfolio improve, EVCJ has learned.

“We are continuing to increase our [private equity] investment as calls are made against commitments, but distributions are few and far between in the current market and that’s a strategic concern for us,” said Michael Taylor, chief of LPFA. “We hope to see distributions start picking up in the next few months.”

For now, the LPFA does not anticipate having any trouble meeting capital calls from funds it has already backed. In fact, said Taylor, when distributions do pick up the pension fund authority may well raise its target allocation to private equity.

The LPFA, one of the largest Local Government Pension Schemes in the United Kingdom, with more than 76,000 members, manages both an “active” sub-fund, earmarked primarily for investments in equities and alternative assets, and a more conservatively managed “pensioner” sub-fund, primarily invested in bonds. As of June 30, the pension fund had about 24 percent of its £2.1 billion in active sub-fund assets invested in alternative investments, including private equity, global property, infrastructure and commodities. Private equity accounted for 9 percent, or £189 million, just short of a 10 percent target allocation.

The pension fund authority has been investing in private equity for at least the last five years. After initially investing in listed private equity trusts, LPFA has gradually shifted to limited partnerships, including funds-of-funds managed by such firms as HarbourVest, LGT Capital Partners and Pantheon Ventures. Through these vehicles the pension fund authority has exposure to a variety of private equity investments in all major regions; it has also invested especially heavily in cleantech funds earmarked to finance solar and windpower projects.