By Muskan Arora

Director George Graham, who will retire from the South Yorkshire Pensions Authority at the end
of 2025, continues to move from listed equities into alternatives, especially real
assets.

Graham joined the pension plan almost eight years ago and has been responsible for the
growth from £8B to £11B.

Within real assets, the plan is significantly increasing allocations to infrastructure and
has carved out two major impact buckets including place-based impact and
climate impact sleeves.

At the moment, the pension plan not only invests locally but has alternative
investments spread across the UK, however a place-based approach would mean
re-investing all the returns locally.

“Over time, that will become almost entirely focused on South Yorkshire as existing
investments mature and payback, we’ll reinvest that money in South Yorkshire,”
said Graham, in an exclusive interview with Markets Group.

“The place-based strategy aims to exploit a number of opportunities. One is the
opportunity around underserved markets. One is an opportunity around the need
for a massive increase in house building in this country and the third one is
about access to growth capital.”

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The climate impact portfolio consists of allocations within renewables, natural capital and
climate opportunities, with an intention to accelerate progress towards net
zero.

Niche technologies including battery storage and other technologies that help move
energy around the grid are key parts of the investment universe here.

The pension plan will review its asset allocation strategy in March 2026.

Diving into his low volatility approach, Graham explains that while actively managed, the
fund takes a lower risk approach not taking big active positions on individual
companies or sectors within its mandates, tending to pick the best companies in
individual sectors.

“By doing that, you get less volatility from than you get from more highly active
approaches where you’re really picking. Hopefully, in this way exclude some of
the downside performance within the total index, and you achieve steadier
growth.”

The pension plan returned 5%, 2% and 5.5% for its 1-,3-and 5- year returns and focuses on
ensuring that longer term return numbers are in excess of the return required
by the actuary.

Within real estate, the pension plan is bullish towards logistics, warehousing, and
industrials. Real estate debt investments are focused locally.

Both in terms of owing assets and financing developments, the residential sector has
proven to give high quality returns.

While London remains a hot market, Graham finds opportunities in the region to be
limited and finds better and less competitive opportunities outside London.

Graham highlighted opportunities in the greater southeast, North of England and Central
Scotland for real estate investments.

Ironically, renewables have a global exposure, and most positive returns are driven from
US-based allocations, with an increasing range of opportunities in the UK and
Europe.

Further, within real assets, the pension plan also invests in farmland and a wider range
of infrastructure including operating wind farms, operating solar farm,
operating port in infrastructure, or properties that are already constructed
and let.

The pension plans own a farmland with a joint venture with Royal London Asset Management as
part of its natural capital portfolio which as well as providing steady income
is being developed to make a positive contribution in terms of the net zero
journey.

Graham has noted multiple allocators in the UK leaning towards private markets, as it
allows them to get “exposure to next generation of businesses” which will
eventually help UK’s economy to grow. In global markets, “if you invest in the
MSCI ACWI, you get massive exposure to a very small number of US tech companies”
which creates a lot of risk.

In the UK, the pension plan is focused on opportunities within life sciences, climate
transition and innovation technology.

The trade war will encourage onshoring and will create opportunities within manufacturing
and defense sectors, said Graham.

“There are lots of advanced manufacturing companies in this part of the world that are
already tied into the defense sector in one way or another. They’re going to
want to grow, because what’s currently going on which provides opportunity.”