UK local authority pension funds and European institutional investors have provided a fresh wave of capital for CBRE Global Investors鈥� growing UK Affordable Housing Fund.
The open-ended vehicle, which pursues social-impact objectives as well as financial returns has deployed nearly all of the 拢250m (鈧�298m) it raised in 2019 and has secured a further 拢120m.
Two thirds of the Local Government Pension Schemes (LGPS) that joined the fund in 2019 have provided fresh commitments, alongside new entrants, including investors from continental Europe.
Fund manager DJ Dhananjai said European investors were increasingly looking at the fund now that it had 鈥渁 demonstrable track record鈥� and been 鈥渄istributing income since the middle of last year鈥� 鈥� while the uncertainty related to Brexit that existed when the fund was launched, particularly in relation to currency risk, had abated.
Meanwhile, four of the six UK LGPS funds that were early investors in the fund 鈥� Hampshire County Council Pension Fund, Rhondda Cynon Taf Pension Fund, Wiltshire Pension Fund, Surrey County Council Pension Scheme, Bedfordshire Pension Fund and Royal Borough of Greenwich Pension Fund 鈥� have increased their investments in the fund.
The fund has to date made 12 investments across the UK, funding the provision of more than 1000 affordable homes. CBRE Global Investors said the new capital-raising would enable it to deliver more than 2,000 homes.
The open-ended fund, which allows for quarterly subscriptions, is intended to grow over time as a perpetual-life vehicle.
鈥淲hat the residential market needs is very long-term capital,鈥� Dhananjai said. 鈥淭he way it鈥檚 structured, it will become more of an income-distributing fund where the major component of the total returns would be income returns.
鈥淲e鈥檙e not looking to sell many of these assets and that鈥檚 why when we are purchasing these assets they tend to score very highly on ESG metrics altogether, so that they are future-proof.鈥�
The fund has a developed a social impact framework with specialist advisory firm The Good Economy, which enables it to set and report on social-impact objectives.
Dhananjai said investors had invested in the fund as part of their real estate allocations, rather than specific social-impact allocations.
鈥淢ost of our investor base expect us to deliver on our fiduciary responsibilities towards their financial objectives. This type of investing has the additional benefit of social impact,鈥� he said.
鈥淚t is quite often thought that if you achieve social impact you have to give up on your financial returns. [But] if you design it well and you mitigate the risks in the whole process of delivering the housing鈥� investing with the right developers and in the right locations, you benefit those who are unable to afford [homes] in the local market [and] you achieve the financial returns alongside social impact.鈥�
However, Dhananjai has observed a shift in emphasis among investors looking at the fund. It was clear during 鈥渢he latest round of capital raising [that investors] were very minded to see what the social impacts were,鈥� he said. 鈥淭here is a shift towards seeing this as core to their social-impact investing.鈥�
Since its launch in the 2019, the fund has produced two annual impact reports. 鈥淭hey are able to see what we said would be delivered under the social impact framework, whether that鈥檚 been delivered or not, and to what extent,鈥� Dhananjai said.
鈥淲e want to be very transparent and open 鈥� happy to share what we can and be approachable. It鈥檚 an emerging sector so it benefits everyone.鈥�
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