84 per cent of UK pension funds expect institutional investors to increase their exposure to the social care sector, investment manager Downing LLP says.
The findings come from the company’s recent report, entitled ‘Emerging Trends in Social Care Investing.’ Surveying UK pension funds with a total £102 billion in assets under management, the research warns that institutional investors need to have a ‘fundamental understanding’ of the social care sector if they wish to produce a positive social impact and benefit from sustainable returns.
The increase in social care exposure comes in response to attractive long-term returns in the sector and the need to meet particular ESG objectives, Downing says. Furthermore, almost 90 per cent of those surveyed believe that local authorities and governments’ commitment to social care provision assets shows strong defensive attributes.
Institutional investors are becoming increasingly involved in the sector due to a lack of public funding, Downing suggests, with private capital filling this gap.
However, those investing in this space need to be aware that it is not a homogenous group. Social care covers a wide range of ‘sub-sectors’, such as elderly care, specialist needs education and more, all of which operate in their own way. A generalist approach must be avoided to produce genuinely positive results, Downing warns.
Mark Gross, partner and head of development capital at Downing, says: “The sector demands a fundamental understanding of local supply and demand factors. In social care, putting in place experienced management teams that have a strong understanding of local market dynamics and the requisite expertise to operate high-quality assets continues to be the best way of generating long-term sustainable returns, avoiding reputational risk and creating a positive social impact.”
