Kensington and Chelsea Council’s pension fund is pouring hundreds of millions of pounds into commercial property in a controversial bet on real estate.
The £1.6bn scheme, located in the UK’s wealthiest borough, has spent about £150m over the past 18 months on a range of property around the country. Deals have included the site of a Morrisons supermarket in Hampshire, a Travelodge hotel in York and the site of an Audi car showroom in Milton Keynes.
The spending spree comes after the 10,000-member scheme quadrupled its target property allocation from 5% to 20%, funded by cutting exposure to equities.
“The properties we are buying are good, we are not trying to generate outsized returns,” said councillor Quentin Marshall, chair of the scheme’s investment committee.
Bets on commercial real estate have proved costly to town halls in the past. In 2020, the government banned local authorities from buying investment property after a near-£7bn spree left many heavily indebted. Pension schemes were not subject to the ban as they are managed separately from their host local authorities and have a legal duty to invest for the best returns.
But Kensington and Chelsea’s move comes as many investors are reducing their exposure to property. Last week, a monthly survey by Bank of America showed fund managers had cut their allocations to commercial real estate to their lowest level since the 2008 financial crisis.
