Growing Demand for Housing Strategies Among LGPS Investors: Significant Expansions and Opportunities Ahead
LGPS Investors Embrace Housing Strategies for Future Growth
Many LGPS investors are embracing housing strategies as a means to improve funding ratios and generate income. The demand for housing investments has been steadily increasing, with Border to Coast, ACCESS, and LGPS Central all expanding their real estate offerings.
In addition, LPPI and London CIV have partnered to launch the London Fund, which focuses on infrastructure and affordable housing investments. Aoifinn Devitt, the newly appointed CIO at London CIV, recently discussed the opportunities for investing in local housing at the Housing151 panel.
However, investing in local impact projects can be challenging, as Matthew Trebilcock, head of pensions at Gloucestershire Pension Fund, points out. The difficulty lies in sourcing affordable homes and convincing managers of the importance of investing in local communities.
The Covid crisis highlighted the importance of navigating demand shocks in the housing market. While the shortage of affordable housing should theoretically mean unlimited supply, unforeseen events like the pandemic can impact liquidity and rental incomes. Institutional investors must be prepared for these challenges and adjust their strategies accordingly.
Despite these challenges, pension fund investors like Dowdall view housing as a suitable match for their liabilities. While bond markets may offer attractive returns, real estate provides a better match for meeting LGPS liabilities in the long term. By diversifying their portfolios with residential housing investments, pension funds can achieve inflation-linked cash flows and better risk-adjusted returns.
In conclusion, the growing demand for housing strategies among LGPS investors reflects a shift towards long-term, sustainable investments. By incorporating real estate into their portfolios, pension funds can not only improve their funding ratios but also contribute to the development of affordable housing in their communities.
