Another institution benefiting from putting a roof over peoples’ heads is the London Borough of Islington Pension Fund.
Islington’s outgoing pensions chief, Richard Greening, says that residential is becoming a popular investment. “I’m pleased that we have started investing in residential property,” he says. “There is such a huge need for that in London and in the UK.
“It is completely mad for pension funds not to be invested in it,” he adds. “I’m pleased that we have kicked that off, although only in a small way at this point.”
Islington’s retirement fund has joined the London Pension Collective Investment Vehicle (London CIV) and Greening hopes that it will be taking residential investment “more seriously”. But real estate is not just about housing, offices, warehouses and shops. More alternative properties are emerging as pension scheme’s chase higher yielding assets. RPMI Railpen, for example, has student and retirement housing in its portfolio.
“We believe in the alternative sector, such as retirement living,” Rule says. “It benefits from strong demographics with the UK ageing at a faster rate than ever before and it also has strong anti-cyclical characteristics. We are looking to increase exposure to alternatives.”
Lancashire also has student housing among its assets. Tomlinson describes the yield on student housing and elderly care homes as a “bit higher” than typical housing. Indeed, Savills puts the yield on student property at between 4.25% in London in the direct let market to 6.5% in secondary markets in the regions.
A MAINSTREAM ASSET
Despite the clear benefits long-term investors can receive from investing in property, it has been far from a smooth ride. Whitfield describes the scheme’s property strategy as a “journey of ups and downs and peaks and troughs”.
“We have had some downturns in our property experience, but we have stuck with it because we see the long-term benefit of capital growth from our direct property portfolio,” he adds. “So we stuck with it and in the past three or four years property has been on an upturn and as we have had volatile markets, in that period, property has provided us with that steady platform that supports the rest of the fund,” Whitfield says.
