UK investment pool adds £1.2bn to private market investments

Jan 12, 2022 | News

Border to Coast Pensions Partnership, one of the UK’s largest public sector pension pools, has added a further £1.2bn to its private market investments.

The move is part of a £2.7bn private markets programme announced in summer of 2021 and have been deployed across a range of new infrastructure, private equity, and private credit funds.

Mark Lyon, head of internal management, said: “We continue to build portfolios that are diversified across strategies, geographies, sectors and size. Particular focus has been given to building strong, long-term relationships with managers.”

He said the portfolio incorporates a “strong mix of high-quality established managers that can often be difficult to access”, alongside sector specialists and emerging managers with differentiated offerings.

“Wherever possible, we’ve sought to lower fees and drive value for money for our partner funds through our scale, early engagement, co-investments and being considered a long-term partner,” Lyon said, adding that investing in private markets is an effective way for Border to Coast’s partner funds to diversify their investments, generate stable cash flows, and benefit from long-term capital growth.

The investments include £593m to four infrastructure funds, £426m to four private equity funds, and £148m to one private credit fund.

Border to Coast’s private markets programme, which was first launched in mid-2019, was designed to offer its 11 Local Government Pension Scheme (LGPS) partner funds access to a wider range of investments, including co-investments, with the aim of providing enhanced, diversified, risk-adjusted returns, the pool stated.

As per its programme, the first two tranches, Series 1A and 1B, saw a respective £1.8bn and £1.2bn invested into private markets – with the commitments for 1C taking the total assets within the Border to Coast private markets programme to £5.7bn.

Infrastructure

KKR Diversified Core Infrastructure Fund ($275m): the fund will focus on investing in critical core infrastructure predominantly in North America and western Europe;

Stonepeak Asia Infrastructure Fund ($210m): the fund will invest in infrastructure assets across Asia within the communications, transport and logistics, and energy transition sectors;

Meridiam Sustainable Infrastructure Europe IV (€100m): the fund will invest in Europe across the three key themes of mobility (movement of people and goods), energy and transition, and environmental and social infrastructure;

Digital Colony Partners II ($210m): the fund will target investments in cell towers, data centres and fibre broadband networks globally.

Private equity

Strategic Value Special Situations Fund V ($130m): the fund will look for opportunities where it can be actively involved in the financial restructuring and subsequent operational improvement of companies;

Insight Partners XIII ($140m): it will focus on providing strategic and operational support to accelerate growth in software, software-enabled services, and internet companies predominantly in the US;

HarbourVest Co-Investment Fund VI ($180m): the fund is a co-investment programme investing alongside high-quality GPs in buyout and growth equity transactions;

Baring Asia VIII ($140m): it will make Asia-focused buyout and control investments with a focus on operational improvements.

Private credit

Ares Senior Direct Lending II ($208m): the fund has a first line strategy targeting middle and upper middle market companies in the US.

Based in Leeds, Border to Coast’s combined assets total around £55bn. It offers its 11 partner funds investment opportunities across Equities, Fixed Income and Private Markets.

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Mr Murphy, who remains a director of Walgreens Boots Alliance (WBA), Boots’ US-listed parent company, is expected to need to recuse himself from boardroom discussions about the potential sale of Boots as a result of his interest in the process at CVC.

Sources said Bain and CVC were working on a plan to acquire Boots that was predicated upon substantial investment in its digital, beauty and healthcare services offerings.

A number of other private equity firms are expected to examine offers for the chain as part of a process to be run by Goldman Sachs.

However, Mr Murphy’s extensive knowledge of the Boots business and Bain’s lengthy planning for a bid are expected to leave their joint offer well-placed to succeed.

Both firms have invested heavily in prominent British businesses ranging from Formula One to Worldpay, while Bain has also recently backed Maesa, a French beauty manufacturer.

WBA announced strong trading figures at Boots last week, although the company made no formal comment on its decision to explore a sale.

It remains conceivable that no transaction involving the 172-year old British health and beauty retailer takes place, although a disposal by WBA is viewed as increasingly likely because of its renewed focus on its home US market.

Spinning the chain off into a separately listed company is also a possibility, according to insiders.

A full-blown auction of Boots, which will probably get under way in the spring, will be among the most significant deals involving a high street chain for many years.

The UK arm, which is among the country’s biggest private sector employers, is run by Sebastian James, the former Dixons Carphone chief executive.

Mr James has presided over a period of renewed investment in the business following a period in which its stores were criticised for failing to modernise.

Valuing Boots is a complicated process given the changing nature of consumer behaviour and its predominantly rented store estate, with many shops tied to long leases, but analysts said that a price of between £5bn and £6bn was realistic.

For Stefano Pessina, the WBA chairman, a decision to sell Boots would mark the final chapter of his involvement with one of Britain’s best-known companies.

The Italian octogenarian engineered the merger of Boots and Alliance Unichem, a drug wholesaler, in 2006, with the buyout firm KKR acquiring the combined group in an £11bn deal the following year.

In 2012, Walgreens acquired a 45% stake in Alliance Boots, completing its buyout of the business two years later.

Mr Pessina and his partner, Ornella Barra, the group’s chief operating officer for its international businesses, have been mainstays with the company since the original Boots merger.

Like many retailers, Boots has had a turbulent pandemic, announcing 4,000 job cuts in 2020 as a consequence of a restructuring of its Nottingham head office and store management teams.

It has also been embroiled in rows with landlords about delayed rent payments.

Shortly before the pandemic, Boots earmarked about 200 of its UK stores for closure, a reflection of changing shopping habits.

The chain’s heritage dates back to John Boot opening a herbal remedies store in Nottingham in 1849.

It opened its 1,000th UK store in 1933.

Bain Capital and CVC declined to comment.

Source: Sky News

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