LPFA commits £125m to funds of funds

The London Pension Funds Authority has selected HarbourVest, Pantheon and LGT to manage a £125m allocation to Europe and the US.

The London Pension Funds Authority, responsible for the retirement plans for public sector employees in the UK capital, has announced a series of commitments to private equity funds of funds as it seeks to increase its exposure to alternative investments, according to Bloomberg News.

The pension has committed £60m to US fund of funds and secondaries investor HarbourVest Partners; £40m to Pantheon Ventures, the UK-based fund of funds manager which also has a secondaries offering; and £25m to LGT Capital Partners, the Swiss fund of funds manager.


In an interview with Bloomberg, Amanda Walker, director of finance and investment for the pension said that HarbourVest and Pantheon would invest 60 per cent of the money they managed in the US, with the balance invested in Europe. The commitment to LGT will be invested solely in Europe.


Walker told Bloomberg that the three firms “had the right combination of people, process and track record, and will give us exposure to private equity in Europe and North America.”


HarbourVest, which is headquartered in Boston, has also drawn money from other first-time investors this year, including the East Sussex County Council pension fund in the UK.


Despite the increased allocation by LPFA, UK pension funds have proved to be cautious during the past couple of years. Of the £7.8bn raised by private equity firms in 2002, UK pension funds provided just £796m into private equity – down from £1.6bn the previous year, according to BVCA data published in May.


The drop in investment by UK pension funds has occurred despite the fact that UK private equity outperformed UK pension funds and all FTSE indices over one, three, five and ten year periods. In 2002, UK private equity achieved a net return of 1.4 per cent, considerably better than UK pension funds and the FTSE All-Share Index, which returned minus 13.9 per cent and minus 22.7 per cent respectively.