More Pension Funds into Resi 11/12

Pension funds likely to follow Islington’s housing investment.

More local government pension schemes will back housebuilding projects once investment limits are doubled, a senior councillor has told Public Finance.

Richard Greening, chair of Islington council’s pensions subcommittee, was speaking after the borough’s pension fund became the first in London to invest in residential real estate.

It will contribute £20m to a new property investment vehicle intended to boost the supply of housing, mainly in London and the southeast of England.

Speaking after the deal was announced on Tuesday, Greening, who is also executive member for finance and performance, toldPF the fund was now ‘up to the limit’ of 15% of assets that can currently be invested in limited partnerships.

The government launched a consultation earlier this month to double this cap to 30%, so funds can invest more in housing and infrastructure.

Greening said Islington’s investment in the UK Residential Property Fund, managed by TM Hearthstone, was ‘planned to get us within that limit’.

He added: ‘It’s a first step that strikes a reasonable balance – something new and innovative [against] the more conservative advice that you get from advisors.’

Asked if more investments were likely in the future, he said: ‘The proposal to raise the limit on partnership investment is certainly helpful. We are up to the limit at the moment. I think that [change is] welcome and I think it will lead to greater investment in this.’

Property is attractive to funds because ‘if you look at it as an asset class it out-performs everything else in recent years’, Greening said. Over the ‘next few years’ more council schemes were likely to invest in residential property as the regulations are changed, he predicted, which would ‘make these investments a lot more normal’.

Greening urged other council pension schemes to invest in suchnew ventures, so town halls could have a ‘serious impact’ on the housing sector.

‘It’s only when you get the scale that other funds would bring that we get a serious impact on the market, in terms of boosting supply,’ he told PF.

Islington’s investment follows the agreement reached in September between Manchester City Council and the Greater Manchester Pension Fund for the fund to invest in the construction of 240 new homes, the first deal of its kind.

A report published last month by the Future Homes Commission, set up by the Royal Institute of British Architects, also urged council schemes to invest up to £10bn in new housing