Private rental sector may be attractive for LGPS funds

The UK private rental sector (PRS) is set to become an attractive investment opportunity for local government pension scheme (LGPS) funds, according to a new white paper from Invesco Real Estate.

According to the white paper, it is expected that under the LGPS pooling reforms, the larger funds will increase investment in infrastructure, but Invesco Real Estate added that access to suitable infrastructure investments may not be straightforward. As a result, existing real estate opportunities could provide a route for funds to invest in infrastructure. Specifically, Invesco Real Estate said the UK PRS has infrastructure-like attributes of physical durability, long life, reliable cash flows and revenues with a low correlation to the business cycle and other asset classes. In addition, the shortfall of housing in the UK is expected to boost growth in the rental sector.

Invesco Real Estate senior director, residential investments, John German, commented: “The UK has experienced a long-term structural imbalance between the supply of new housing and the demand from households, and institutional grade PRS investments are well-placed to take advantage of this opportunity, while at the same time positively supporting the functioning of society through the provision of quality housing.” German added: “We believe the UK PRS has characteristics which are becoming more and more relevant to LGPS funds as they become increasingly mature, offering access to high quality UK-based infrastructure assets.”