now:pensions, part of the Cardano Group, a business of Marsh McLennan (NYSE:MMC), and the workplace pension provider for over two million people, today announced its first investment in private markets with an allocation to UK affordable housing. This investment supports the now:pensions ambition, as a signatory to the Mansion House Accord, to invest at least 10% of the default fund in private market assets, including at least 5% in the UK by 2030.
This is expected to improve member retirement outcomes by generating better returns and aligns with now:pensions’ ambition to make responsible, socially impactful investments.
The focus of this investment is to increase the supply of affordable housing in the UK, with capital strategically targeted towards areas with the greatest need. In the UK, there are over a million people on social housing waiting lists, and the average age of a first-time buyer has risen to 34, an increase of 30% since 2007. On average, in London, people pay 47% of their disposable income on rent, versus 34% nationally.
This investment will allow now:pensions to gain exposure to residential properties designated as affordable and deliver long-term, stable, inflation-linked returns. Specifically, it will support the development of three types of affordable housing:
- Regulated rentals, for people on the social housing waiting list and receiving a housing benefit.
- Local affordable rentals, designed for people priced out of the local rental market; and
- Shared Ownership models, for people who cannot afford a home in the local market.
now:pensions’ investment into affordable housing marks the first stage in the pension provider’s private markets strategy, and the Trustee is currently researching other suitable investments that would benefit its members.
Commenting on the announcement, Joanne Segars OBE, Chair of now:pensions’ Board of Trustees, said: “This is our first investment into private markets. Investing in affordable housing presents an opportunity to generate strong financial returns for our members while contributing to a vital social need. The now:pensions Trustee will continue to explore opportunities to expand its exposure to private markets, with a particular focus on sectors that offer strong growth potential and align with the long-term needs of our members.”
Martyn James, now:pensions’ Director of Investment, adds: “This investment is expected to provide complementary return drivers compared to more traditional parts of the growth portfolio, providing good diversification. Our investment strategy remains focused on delivering long-term value, and we are confident that our diversified approach, which includes an ambition of at least a10% allocation to private markets by 2030, will continue to benefit our members’ retirement savings.”
now:pensions is a UK master trust, managed by an independent Trustee. The Trustee believes that incorporating environmental, social and governance (ESG) factors, as well as real-world sustainability impact, into the investment approach helps mitigate risks, enhance returns and is in its members’ best long-term interests.
