UK pension giant eyes more Asia exposure

The £46bn Border to Coast pension pool wants to benefit from particular growth in China and healthcare in the region.

Border to Coast Pensions Partnership, one of the UK’s biggest public sector pension pools, has tilted its private markets programme towards Asia in its latest round of fund commitments.

The £46 billion ($64.76 billion; €53.41 billion) investor believes that investments in the region – particularly in China – will continue to grow, with the healthcare sector being particularly notable for seeing favourable returns, Mark Lyon, head of internal management, told Private Equity International.

“One of the key things we have in our private equity offering is a tilt towards Asia as a result of stronger economic growth in the region and favourable demographics,” Lyon said. He continued that the pension pool sees “strong growth coming from the Chinese healthcare spending across not only pharmaceuticals but [also] medical technology and also hospital services.”

In early June, Border to Coast said it would be making £2.7 billion of fund commitments as a part of its burgeoning private markets programme. The pension aims to allocate all the capital by March next year.

In a statement about the commitments, Border to Coast detailed final round commitments for Series 1B of its private markets programme. These include $75 million to C-Bridge Healthcare Fund V; $50 million to GreatPoint Ventures Innovation Fund III; and $125 million to EQT Infrastructure Fund V.

Launched in May 2019, the private markets programme had three iterations of fund commitments in its first series and will continue to pursue further indirect investments with no set end date, Lyon said. In considering fund managers, the pension looks at the credibility of the manager and the return on investments provided to the GP’s previous limited partners. It also analyses the fund manager’s portfolio holdings to assess how those companies have grown and been improved by the fund manager prior to exiting a given deal, Lyon added.

The Leeds-based pension fund’s roster of private equity fund managers prior to this Series 1C round of commitments predominantly consisted of large managers with funds focusing on global markets, including Asia. Border to Coast had previously committed $94 million to KKR’s 2020-vintage Asian Fund IV and $60 million to Baring Private Equity Asia’s 2018-vintage Barings Asia Private Equity Fund VII.

Lyon said that both KKR and Baring were ideal fund managers to enable Border to Coast to enter Asian private equity markets due to the firms’ track records and extensive resources. The pension chose to partner with Greater China-focused CBC Group through its commitment to C-Bridge Healthcare Fund V, Lyon said.

Border to Coast works with advisory firm Albourne Partners to look at various risk factors, including compliance and operational risks.

According to Lyon, 15 percent of Border to Coast’s AUM is exposed to private equity. It is likely that this exposure will increase as alternatives continue to provide enhanced returns compared to listed equities, he added.

– The author is a member of PEI’s Research & Analytics team.