Islington Council is to invest £20 million of its £800 million defined benefit (DB) pension fund in residential real estate to reduce liabilities and boost the supply of housing.
The fund will hold a diversified mix of new and recently built properties, half of which are based in London and the South East.
Residential property investment manager Hearthstone Investments has been chosen as fund manager following a competitive procurement exercise. Three fund managers were shortlisted and interviewed by a pension sub-committee, chaired by councillor Richard Greening, executive member for finance and performance at Islington Council.
Greening said: “Our decision to invest in residential property is based on careful analysis of the options.
“It reflects our view that investment in this sector will produce good long-term returns for local taxpayers and the members of our pension fund.
“The fund offers a tax-efficient means for our pension fund to invest in the UK’s largest asset class without taking on the risks associated with investing in housing directly or in smaller schemes.
Christopher Down, chief executive at Hearthstone Investments, added: “Recent government and media attention has highlighted the opportunity for local government pension funds to play a role in the delivery of housing, a stable long-term investment which can support social objectives while delivering diversification to multi-asset portfolios.
“However, financial performance and the safe custody of assets for hard-working pension scheme members must remain a key priority.”