Local Authorities’ Property Fund outperforms peer group
0The Local Authorities’ Property Fund (LAPF) has jointly outperformed all of its peers over the past five years, according to new data.
New figures from real estate analysis firm IPD show the fund increased in value by 14.1 per cent over the past year, with a jump of 5.1 per cent during the last quarter.
The data puts the LAPF, managed by CCLA’s head of property Paul Hannam, as the joint top performer over the past year and five years – and second over three years – in the All balanced property fund index of around 25 UK property funds.
John Kelly, head of client investment at CCLA, which manages the fund, told Room151: “The strong returns over the past year reflect an upturn in the property market. Until May last year, the property market was very dull but all of the gains have been achieved since that point.”
Kelly said that the size of the fund has grown in size over the past year from a value of £80 million to £130 million, thanks to an increase in councils investing in the fund.
He said: “We have made more effort to publicise the benefits of the fund and councils are recognising its merits.”
The fund’s value is derived from a mixture of capital values and rental income. Councils can pocket rental income immediately, but only receive the increase in capital values when they cash in their investment.
Over the past year, rental income provided councils with a return of around 6 per cent on their investments, Kelly said, with a rise of 8 per cent in capital values.
Because rents are fixed by contract, the fund continued to pay returns of more than 5 per cent throughout the downturn, he added.
Other than steady returns, Kelly said that another advantage of the fund was its special treatment under government rules which allows local authorities to account for their investments in the fund at the value they were purchased, even when the capital value fluctuates.
Around 40 local authorities of varying sizes have investments in the fund ranging from £25,000 to £7 million. These are predominantly treasury investments, although some local authority pension funds have put money in.
And councils have allocated a further £30 million to the fund in treasury management strategies for 2014-15, Kelly said.
CCLA runs LAPF on behalf of the Local Authorities’ Mutual Investment Trust (LAMIT). LAMIT was established around 30 years ago to provide investment services for local authorities in the UK, and is controlled by members and officers appointed by the associations of local authorities in England, Wales, Scotland and Northern Ireland and by trust members representing the fund’s unit holders.
