Yield-Starved U.K. Pension Funds Jump on Private Debt Bandwagon
A newly created credit fund carved out jointly by two U.K. local government pension authorities plans to earmark almost half of its assets for investments in direct lending.
The Local Pensions Partnership, formed by pooling the funds of local government retirement funds in London and Lancashire County, will plow approximately 45 percent of its 1.3 billion pound ($1.7 billion) capital into direct lending, according to a person familiar with the matter, who is not authorized to speak publicly and asked not to be identified.
The credit fund’s direct lending push is just one more example of efforts by pension funds in the U.K. to boost returns and meet their payout commitments in a low-yield environment. Public pension funds, mostly local government funds, now make up 32 percent of aggregate capital invested in private debt, which includes direct lending as well as mezzanine, special situations, distressed and venture debt, according to research firm Preqin.
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