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BlackRock launches alternative income fund for UK DB schemes

07 July 2016

Image for BlackRock launches alternative income fund for UK DB schemes

BlackRock has launched a new income fund for DB schemes which has access to a range of income sources.

The UK Strategic Alternative Income Fund provides schemes a range of alternative income in one portfolio.

BlackRock says the fund is arriving at a time when pension schemes are increasingly seeking alternative income.

It says traditional asset classes remain scarce and a survey it conducted among its largest institutional clients in 2015 found private markets looked set to prosper this year.

Andrew Stephens, head of intermediated clients for the UK at BlackRock said a single portfolio offers better access to markets.

He said: "UK pensions schemes are increasingly embracing less liquid strategies to enhance returns, but these types of investments are not often easy to exploit."

"By creating a single portfolio that provides exposure to a range of alternative income sources we are helping schemes access these markets more easily while also providing diversification."

The fund aims to deliver long term stable cash flows, linked to inflation and sourced from investments across infrastructure debt, renewable energy, real estate debt, long least property and direct lending in the UK.

It will access these markets through a mixture of funds, bespoke mandates, and direct transactions.

Stephens said public markets alone will not help funds to meet their objectives, but private markets are a "compelling" option for UK pension schemes.

He said: "With many schemes' recovery plans being in excess of 10 years, the illiquidity premia that schemes can source from private markets are compelling - and schemes with long term investment horizons are ideally positioned to benefit."

Stephens added that BlackRock expects demand for the new offering to come from schemes of all sizes.

The fund is semi open-ended and investors are provided with windows of liquidity every year, after an initial four-year lock in.

First published 07.07.2016

Lindsay.sharman@wilmingtonplc.com