Loan Note: UK pensions back illiquids; CDP launches environmental reporting tool

UK pensions show their support for illiquid assets. Plus: a new platform aims to standardise private companies' environmental reporting and CQS teams with Jefferies for CLOs. Here's today's brief for our valued subscribers only.

They said it

“Real assets have outperformed other asset classes in previous inflationary periods. We expect this trend to continue.”

Taken from BlackRock’s Inflation and Real Assets report.

First look

Regulatory threat recedes as UK pensions back illiquids
With the regulatory winds apparently now blowing in their favour, illiquid assets are set to benefit from continuing strong support from UK pension schemes, according to a new report from real assets manager Alpha Real Capital.

The UK’s Pensions Regulator had been considering capping pensions’ investments in unquoted assets at no more than a fifth of their total portfolio. However, with the threat of this now having receded, it is clear that pension support for illiquid assets is as strong as ever.

Among the key findings of Alpha’s research:

  • Around 85 percent of UK professional pension fund investors said their scheme will increase its allocation to illiquid assets over the next three years, with 7 percent expecting a significant rise.
  • About 58 percent of investors said their scheme allocates up to 25 percent to illiquid assets as part of their investment strategy.
  • Nearly 80 percent said the main reason for their increased interest in illiquid assets is greater transparency; with nearly 70 percent saying increased opportunity to invest in illiquid assets is also a key factor.
  • More than half (58 percent) said they expected a premium for investing in illiquid assets of between 0.5 percent and 1.0 percent. Just over a third expected between 1.0 percent and 1.5 percent.

New platform seeks to raise bar on environmental reporting
In the belief that there is increased demand from investors, global non-profit organisation CDP has launched a new standardised environmental disclosure platform specifically for private markets.

CDP believes reporting demands are much less strict for private companies than for listed entities when it comes to environmental reporting and believes the “transparency gap” has increased as public companies increasingly sell high carbon-intense assets to private companies.

The platform will aim to improve disclosure from private companies of all sizes and will compare companies like-for-like on their environmental performance, which it believes is increasingly in demand from investors.

CDP says its platform is backed by investors representing $2.3 trillion of assets including Beach Point CapitalColler CapitalM&GNeuberger Berman and Nuveen.

Essentials

CQS, Jefferies and others team up for CLO equity
CQS has entered a CLO equity investment agreement with Jefferies Group and three other investment management firms, they announced this week. Jefferies and the firms will provide CLO equity capital and warehouse funding for four to five CQS CLOs for the next two to three years and share in the profits.

“We are delighted to be working with our new strategic investors as we build solutions for CLO investors to access our US loan investment expertise,” said Michael Hintze, founder and co-chief executive officer of CQS, in a release.

CQS is a $21.6 billion credit-focused asset manager whose CLO platform has 19 corporate credit analysts and is led by Jim Fitzpatrick.

Wildeman targets growth at ACORE
ACORE Capital, a San Francisco-based credit manager focused on commercial real estate lending, has hired alternative investments and capital markets professional Jennifer Wildeman as a managing director to help the firm grow its investment management platform.

Wildeman, who will report to senior managing director and head of capital raising Michael Romo, joins from Aksia where she was a senior portfolio adviser. In that role, she advised a range of institutional investors and was responsible for sourcing and advising on private investment opportunities with a focus on private credit.

LP watch

Institution: Tennessee Consolidated Retirement System
Headquarters: Nashville, US
AUM: $62.45 billion
Allocation to alternatives: 26.2%

Tennessee Consolidated Retirement System approved a $250 million commitment to Oaktree Real Estate Debt Fund III at its August 2021 investment committee meeting, a contact at the pension informed Private Debt Investor.

TCRS’s recent private debt commitments have been primarily to global vehicles focused on the corporate sector. The pension currently allocates 7.6 percent of its investment portfolio to private debt.


Today’s letter was prepared by Andy Thomson with John BakieRobin Blumenthal and Michael Haley.
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