South Yorkshire Pension Fund is the eighth largest LGPS fund in the UK as of 2020. Uniquely the fund is administered by the South Yorkshire Pensions Authority (SYPA), a democratically accountable single purpose pension organisation, which manages the pension schemes of the four district councils (Barnsley Metropolitan, Doncaster Metropolitan, Rotherham Metropolitan and Sheffield City Council) and nearly 600 other employers. In 2020 the fund had 161,477 individual members and a value of £8.2 billion. Since 2018, the majority of the Fund’s investments are managed by Border to Coast Pensions Partnership. However, around 30%, including a very substantial legacy alternatives portfolio is currently directly managed by SYPA. This will reduce to around 3% when the pooling process is completed and the legacy alternatives portfolio has been fully realised.
SYPA has a longstanding commitment to investing within the South Yorkshire region with the aim of generating a commercial return and positive local impacts. SYPA has made investments across all the key PBII sectors including SME finance, affordable housing and renewable energy. The Authority prefers to make use of external managers in this area in order to minimise conflicts and ensure a neutral evaluation of the commercial merits of specific proposals.
In 2019, SYPA established a specific allocation to development finance in South Yorkshire and appointed CBRE to manage this allocation, including originating and appraising opportunities. As these are direct lending transactions SYPA has to make the final investment decisions. The South Yorkshire Pension Fund currently has an allocation of £80 million and is expected to make loans in the range of £10-15 million with a current return across the portfolio of 6.75%. The fund works in tandem with the JESSICA (Joint European Support for Sustainable Investment in City Areas) Fund, a regional investment fund with EU funding which supports local and regional economic development.
Councillor Sue Ellis, Chair of the South Yorkshire Pensions Authority when the CBRE mandate was awarded said:
“We are pleased to be working with CBRE to achieve financial returns for our scheme members while at the same time supporting delivery of investment in communities across South Yorkshire. This is an example of an area where we can achieve the commercial return we need to pay pensions at the same time as ensuring the delivery of schemes which will improve the long term prospects of the local economy.”
SYPA’s local investment strategy is to target long-term investments which are designed to tackle local economic, social and environmental challenges which would not be addressed by traditional commercial investors.
To date, loans have been approved for the following projects:
- Redevelopment of former foundries into 52 low carbon homes in Little Kelham, Sheffield targeted at young graduates and supporting regional policy to stop the ‘brain drain’. The SYPA funding complemented funding from the JESSICA Fund and other regeneration funding streams.
- Regeneration of an old coalite plant in Bolsover, Derbyshire in partnership with Derbyshire County Council (the site is within the Sheffield City Region). Public funding was used to finance remediation works, with pension fund investment used to fund the infrastructure, including sewers and roads. The site will provide business space and is expected to contribute to the creation of over 2,000 local jobs, and the fact of this funding has attracted the first lettings to the site.
- Construction of a grade A office building as part of a new development opposite Sheffield station. This complements two previously developed buildings and completes the redevelopment of a significant gateway site.
SYPA also invests in third-party managed impact funds, including those managed by Bridges, Foresight, Triple Point and Civitas. These are not regarded as routes to achieving local place-based impact, however, they meet target returns and are viewed positively because of their impact focus, including on SME development and social and affordable housing.
SYPA has a unique governance arrangement which guards against conflict of interest while maintaining close engagement with its membership and local and regional stakeholders. Regular consultations are made with the pension fund members to take their concerns into account. In addition to investment opportunities scouted out and originated directly by CBRE, many of the local investment opportunities are proposed through city region structures, themselves products of the wishes of local constituents. Many of these communities represent former miners and colliery workers, ensuring traditionally neglected and deprived communities can shape the direction and composition of local investments. As such, communication and stakeholder engagement at the local level are incorporated into the investment process for a large portion of investments.