Aviva Investors has launched the Aviva Investors Real Estate Active LTAF (REALTAF), its first fund under the Long Term Asset Fund (LTAF) regime, a new category of fund designed to provide access to long-term private market assets, and the largest such fund launched in the market to-date.
The fund, which consists of an initial £1.5bn portfolio of carefully selected direct real estate assets seeded by Aviva UK Life, will enable a broad range of institutional and professional investors – including defined contribution pension funds, master trusts and local government pension funds – to access real assets investments more easily, whilst better matching the liquidity of the underlying assets with that of the Fund.
Daniel McHugh, Chief Investment Officer, Real Assets, at Aviva Investors, commented: “As one of the largest investors in UK real estate we are thrilled to bring REALTAF to the market. It represents the largest LTAF on offer today for wealth and institutional investors, and one we want to make the go-to fund of choice for investment in real assets. We are also pleased to have the backing of Aviva UK Life in creating a fund which we believe represents the future of real assets investing. Not only does this demonstrate our ability to innovate and provide new products to meet the evolving demands of the market, it also shows the confidence we have to consistently originate assets, at scale, whilst matching investors’ underlying liquidity requirements.”
Featuring a long-term absolute return target, REALTAF will adopt a strategy complementing Aviva Investors’ ‘active equity’ approach to real estate equity, which is characterised by a preference to invest in high-conviction locations and emerging themes it strongly believes are well-placed to deliver long-term value.
It will be managed by Tim Russell, Senior Fund Manager at Aviva Investors.
REALTAF has also been created under the belief that real estate assets incorporating sustainability considerations will materially outperform those that do not adequately price-in material risks from sustainability-related obsolescence. As part of the ongoing management of REALTAF, Aviva Investors will regularly review ongoing carbon emissions generated by buildings across the Fund to help inform asset allocation decisions and drive investment performance.
Alongside this, Net Zero audits will be conducted to understand each building’s current Net Zero alignment, its transition potential, and the solutions available, thereby forming a decarbonisation strategy for each individual asset. Aviva Investors will also undertake social value audits to assess the social needs of areas immediately surrounding each building in the portfolio, along with the contribution these assets make to surrounding communities. This supports Aviva’s aim to help the UK become the most climate-ready advanced economy.
Daniel McHugh, added: “Real assets are an important element of long-term investment strategies, whether for risk or return diversification, or providing regular, inflation-linked income. They are also a vitally important ingredient in the transition towards a just and socially equitable low carbon future. Yet, until now, a significant portion of the UK’s wealth and pension market – particularly defined contribution schemes – have not been able to allocate to real assets, and certainly not to the extent they would like. We firmly believe the LTAF regime will have significant benefits for retirement portfolios, helping to improve long-term investment outcomes for our clients and, ultimately, individuals saving for their retirement.”
Pierre Biscay, Head of Customer Investments at Aviva UK Life, said: “We are delighted that our With-Profits funds are able to support the launch of REALTAF, giving them the opportunity to pool and diversify their existing property holdings whilst also benefitting from the potential growth opportunities available in the sector. Real Estate remains a key part of our investment strategy and has delivered excellent value for our customers to date. The launch of REALTAF enables us to continue to access the asset class far into the future under a new and innovative fund structure.
“As one of the largest investors in the UK, Aviva has the power to create a huge amount of positive change. We already invest a substantial amount into the UK and its communities by financing offshore windfarms and social housing schemes, improving the energy intensity of the built environment, funding restoration, carbon capture and woodland creation schemes. All of this supports our aim to help the UK become climate ready. We believe this new fund can help us do even more, making the most of the investment expertise of the Real Assets business and its ability to find projects that can deliver long-term value for our With-Profits customers, us as a business, and for the UK.”
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