UK pension funds expected to increase social impact investments, Alpha Real Capital finds
31 March 2023 UK
Image: Kenishirotie/stock.adobe.com
87 per cent of UK Local Government Pension Scheme (LGPS) fund professionals expect to see funds focus on producing positive social impact through their investments, according to research from specialist secure income asset manager Alpha Real Capital.
The study polled 100 fund professionals on their predictions for the industry back in January 2023. Social impact allocations include property and infrastructure investments that offer health, housing, education and other essential services.
98 per cent of those polled believe that this approach supports the UK’s ‘levelling up’ agenda, with 77 per cent expecting social infrastructure allocations to be based solely in the UK.
Despite the expectation of increased engagement with social infrastructure investing, various difficulties were cited as barriers to doing so. Knowledge of investment and impact characteristics, availability of market options and limited illiquidity budgets were the three most prevalent categories. Potential operational risk and low current returns are also proving challenging.
When implementing social infrastructure mandates, only 2 per cent of respondents prefer to use their in-house teams. The majority (55 per cent) favour third-party managers, 31 per cent choose LGPS pools and 12 per cent prefer to run segregated mandates through third-party managers.
Brian Rose, CEO of Alpha Real Capital, says: “It is very encouraging to see that LGPS funds continue to place such emphasis on generating positive social impact through their investments, and that this is becoming a greater priority. Ultimately, additional investment into social infrastructure will benefit the underserved in our communities at a time when public finances are extremely constrained.”
James Murray, co-head of social infrastructure at Alpha Real Capital, comments: “Alpha Real Capital has successfully deployed over £1.2 billion into social infrastructure over the last decade, but much more needs to be deployed across the country to meet the current and future shortfalls in creating new, and upgrading old, infrastructure.”
The study polled 100 fund professionals on their predictions for the industry back in January 2023. Social impact allocations include property and infrastructure investments that offer health, housing, education and other essential services.
98 per cent of those polled believe that this approach supports the UK’s ‘levelling up’ agenda, with 77 per cent expecting social infrastructure allocations to be based solely in the UK.
Despite the expectation of increased engagement with social infrastructure investing, various difficulties were cited as barriers to doing so. Knowledge of investment and impact characteristics, availability of market options and limited illiquidity budgets were the three most prevalent categories. Potential operational risk and low current returns are also proving challenging.
When implementing social infrastructure mandates, only 2 per cent of respondents prefer to use their in-house teams. The majority (55 per cent) favour third-party managers, 31 per cent choose LGPS pools and 12 per cent prefer to run segregated mandates through third-party managers.
Brian Rose, CEO of Alpha Real Capital, says: “It is very encouraging to see that LGPS funds continue to place such emphasis on generating positive social impact through their investments, and that this is becoming a greater priority. Ultimately, additional investment into social infrastructure will benefit the underserved in our communities at a time when public finances are extremely constrained.”
James Murray, co-head of social infrastructure at Alpha Real Capital, comments: “Alpha Real Capital has successfully deployed over £1.2 billion into social infrastructure over the last decade, but much more needs to be deployed across the country to meet the current and future shortfalls in creating new, and upgrading old, infrastructure.”
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