A group of five Local Government Pension Scheme funds have invested £100m into building and managing private-sector rented housing.
Five council pension funds invest £100m in private rented housing
The Derbyshire, Nottinghamshire and Staffordshire CC funds, along with the Teeside and West Midland funds, have invested in a ten-year closed-end fund run by Hearthstone Investment Management, which will fund the building and management of housing and low-rise blocks of flats “in areas of good rental demand”.
Derbyshire, Nottinghamshire, Staffordshire and the West Midlands funds are part of the LGPS Central pool, while Teesside is a member of the Border to Coast pool.
Hearthstone said in a statement the fund “contrasts with a number of other residential funds which are focused on large blocks of flats in city centres”. It will target a 4% annual yield, plus capital growth.
Philip Atkins, chair of the Staffordshire CC pension panel and leader of the council, said: “This is an opportunity for funds to make an investment that firstly meets our investment requirements, but also contributes in a small way to the housing need of the country. The growing demand and undersupply of quality housing, in particular in the private rented sector, makes residential property more resilient to economic downturns and attractive to long term investors.
“The Hearthstone Residential Fund will provide a reliable income stream over the next decade while the underlying assets will act as a hedge against inflation.”
Cristoforo Rocco di Torrepadula, partner at Hearthstone, said: “We see an opportunity to focus on regional centres of economic growth, which are undersupplied with good quality rental accommodation. This is also an opportunity to bring institutional quality management to what has been to date a generally poor-quality consumer product.
“We are particularly delighted to be working with group of local authority pension fund investors.”