Islington Council Pension Fund is to invest £20 million in residential property with Hearthstone Investments. It is believed to be the first London borough council pension fund to invest in residential property.
Islington will invest in the Hearthstone UK Residential Property Fund which is understood to be the UK’s first residential property authorised investment fund. Councillor Richard Greening, who is Islington Council’s executive member for finance and performance, 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. This fund offers a taxefficient means for our pension fund to invest in the UK’s largest asset class without taking the risks associated with investing in housing directly or in smaller schemes.”
The Hearthstone fund holds a mix of new and recently-built properties, with most units let to private market tenants, plus some corporate lets. It is expected to yield 4% net rental income, with capital values predicted to rise slowly to a stable 5% growth per annum by 2017. Islington said it received nine tenders from fund managers and three were shortlisted. Hearthstone Investments chief executive, Christopher Down, said: “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, longterm investment which can support social objectives while delivering diversification to multi-asset portfolios.”