New research from AlphaReal with UK Local Government Pension Scheme (LGPS) fund professionals reveals that over the next 12 months, 87% believe the funds they help to manage will increase their focus on generating a positive social impact from their investments.
Investing in social infrastructure is one way LGPS funds can generate a positive social impact. Social infrastructure is defined as investments into property and infrastructure that provide essential services, such as health, housing, or education.
The research, which was commissioned by AlphaReal, the specialist secure income asset manager, found that more than three-quarters (77%) of LGPS fund professionals will concentrate their social infrastructure allocations on the UK only.
Both social impact and UK focused investing potentially relate to the broader ‘levelling up’ agenda in the UK, the term used to describe the emphasis on bridging the economic gap within communities and across geographical areas. Indeed, 98% of respondents believe an allocation to social infrastructure supports levelling up.
In terms of their preferred implementation approach for awarding social infrastructure mandates, more than half (55%) favour using third party managers, compared to 31% who prefer LGPS pools and 12% who prefer segregated mandates run by third party managers. Just 2% prefer using their in-house teams.
However, survey respondents identified knowledge of the investment and impact characteristics as the biggest barrier to investing in social infrastructure, followed by availability of market opportunities, and restricted illiquidity budget.
|Ranking||Barriers to investing in social infrastructure – ranked in order of being the biggest barrier|
|1||Knowledge of the investment and impact characteristics|
|2||Availability of market opportunities|
|3||Limited illiquidity budget|
|4||Potential operational risk|
|5||Current returns are too low|
Phillip Rose, CEO, AlphaReal said, “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.”
Boris Mikhailov, Head of Client Solutions, AlphaReal said, “LGPS funds and other institutional investors are placing a growing focus on social infrastructure as part of their impact investing strategies. Additional investment into the areas of health, housing and education can provide investors with real returns while generating real impact in communities.”
James Murray, Co-Head of Social Infrastructure, AlphaReal said, “AlphaReal 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. .”
AlphaReal invests in UK and European assets with predictable, secure, long-term cash flows. The asset manager provides market leading and innovative real asset solutions across a range of investments such as commercial ground rents, UK renewable infrastructure, and social infrastructure including health, housing and education.