Agenda item

This report updates the committee on the London CIV UK Housing Fund and the Product Assurance Review conducted by the Fund's investment advisors.

Whilst this item was originally listed on the agenda as Item 8, due to sensitive information contained in Appendix 1 of the report, the Committee agreed to move its consideration in to the closed session of the meeting and it was therefore considered as item 12.

Sawan Shah introduced the report, which detailed the analysis and review undertaken by the Fund’s investment advisor, Hymans Robertson, of the London CIV UK Housing Fund, including recommendations for investment and implementation. The Committee noted the Fund was currently overweight in diversified growth assets compared to the long term strategy. Thus, the decision to invest in the London CIV UK Housing Fund would contribute to rebalancing the Fund’s portfolio and meeting the 10% long term target allocation in property.

The London CIV UK Housing Fund aimed to invest indirectly through third party funds with the purpose of increasing the supply of good quality, affordable housing in the UK while also generating a competitive risk-adjusted return. It focused on three strategies within the residential housing sector: general needs affordable and social housing, traditional supported housing, and specialist housing. These were broadly be defined as:

·       General needs affordable and social housing - Social and affordable properties were typically leased to councils or housing associations who sublease the properties to eligible tenants to meet their social housing obligations. Eligibility criteria depends on income, requirements due to disability, children, and state of existing accommodation.

·       Transitional supported housing - These were properties typically leased to council or housing association or charities who provide supportive but temporary accommodation to bridge the gap from homelessness to permanent housing.

·       Specialist housing - These were properties typically leased to councils, housing associations or charities who provide additional support including physical and mental health counselling. Councils typically contribute towards some or all of these care and support costs.

Christopher Osbourne (Senior Portfolio Manager, Private Markets, London CIV) was subsequently invited by the Chair to present the London CIV UK Housing Fund in further detail. The Committee noted the following:

·       The Fund had received FCA approval in Q4 2022.

·       In providing an overview of the evolution of the UK Housing Fund, the shortlisting process for UK housing managers was detailed, with further due diligence carried out on selected managers.

·       The target allocation of each type of housing was detailed, in addition to highlighting the strong focus on social impact.

·       The case for investing was presented, which highlighted the resilient returns and opportunity to diversify the Fund’s property allocations.

·       The terms of the Fund were detailed, including the investment strategy, target yield, and management fees.

·       The environmental, social and governance credentials of the shortlisted managers were outlined, which included responsible investment, adherence with United Nations Sustainable Development Goals, and compliance with the Global Real Estate Sustainability Benchmark.

·       To achieve social and environmental goals, London CIV had adopted an impact framework in which housing managers were expected to adhere to. Included in the framework was aligned reporting and standardised measurement practices to target a single set of common metrics.

Following the conclusion of the presentation, the Chair welcomed questions from the Committee, with discussions outlined below:

·       A discussion took place regarding returns on investment, in which the general resilience of the market was at the forefront.

·       Investing in private vs social housing was examined, in addition to considering the affordability of rent.

·       Non-financial measurements and net-zero goals were considered.

·       The potential local impact and target build numbers were discussed.

Once the discussion had finished, London CIV attendees exited the meeting, and as a result of further consideration the Committee RESOLVED to:

(1)           Note the analysis set out in Appendix 1 of the report undertaken by the Fund’s investment advisors, Hymans Robertson, in relation to an initial investment in the LCIV UK Housing Fund.

(2)           Approve an investment commitment of 2.8% of total Fund assets (c. £30m) to the LCIV UK Housing Fund subject to the Corporate Director, Finance and Resources, in consultation with the Chair of the Pension Fund Sub-Committee, being satisfied with the conditions as set out in section 3.16 of the report.

(3)           Note that subject to approval in relation to section 2.2 of the report, officers would rebalance the appropriate mandates to move towards the Fund’s strategic asset allocation to fund this investment as set out in section 3.17 of the report.