Falkirk Council Pension Fund and Kent County Council have both committed 拢30m (鈧�36.4m) to UK property funds.
Falkirk has given 拢30m to fund manager Hearthstone Investments to invest in Scottish social and affordable housing as the sector shows signs of attracting investment.
The commitment from Falkirk boosts Hearthstone鈥檚 Housing Fund for Scotland, a new fund for pension schemes looking to invest in local housing via fixed-rate corporate bonds issued to registered social landlords. Properties will then be let to a housing association on an operating lease for an initial period of 10 years.
The fund is scheduled to launch later this year, with the first phase of investment from Falkirk providing funding for around 300 new social and affordable homes. UK property manager Places for People will deliver the first stage of the fund鈥檚 investments via Scottish subsidiary, Castle Rock Edinvar.
Investment between social and affordable housing will 鈥渇lex鈥�, Hearthstone said, to ensure overall returns from the fund stay within a pre-defined range. Falkirk is the second local government pension fund to invest with Hearthstone, after Islington Borough Council gave the fund manager 拢20m in January last year.
Linda Selman, partner at Hymans Robertson, said a number of funds have looked at the potential to invest in social housing 鈥� but few have committed so far.
鈥淥ne of the reasons (for that) is the challenge in finding suitable pooled vehicles and/or managers,鈥� Selman said. 鈥淲e would expect social housing to form only a small part of a fund鈥檚 strategy 鈥� say 1% to 2%. It is essential to get a healthy degree of diversification within any social housing investment.鈥�
Falkirk鈥檚 move into social housing investment serves two purposes, its committee convenor, John Patrick said.
鈥淭his is an investment that will deliver solid returns for our fund and social good for communities,鈥� he said. 鈥淪ocial benefit and financial returns are both important to funds like Falkirk.鈥�
Meanwhile, Kent鈥檚 superannuation fund has given a 拢30m mandate to Kames Capital for its UK Active Value Property Fund. The closed-end fund, which has also been given 拢10m by Molins Plc鈥檚 UK pension fund, typically buys small, secondary properties on long leases.
The total 拢40m is the fund鈥檚 second close following an initial 拢115m raised at launch in October last year. Kames said the original 拢115m has been committed, with properties in the 拢2m to 拢10m range bought by the fund, which has a seven-year life. Kames is targeting returns of 8% to 10% for the Jersey Property Unit Trust which has an option to extend for a further two years.
