The fund hopes to attract further commitments from local government pension funds, as the sector is encouraged to direct more investment into local communities.
UK local government pension scheme pool LGPS Central (LGPSC) has committed £58m (€66m) to Octopus Capital’s Octopus Healthcare Fund, a responsible investor in care homes, marking the first investment in the care home asset class by the pool.
LGPSC is the investment manager for the pooled pension fund resources of the English counties of Cheshire, Derbyshire, Leicestershire, Nottinghamshire, Shropshire, Staffordshire, West Midlands and Worcestershire. Its investment was made alongside funding of just under £2m by Knight Frank Investment Management, the investment arm of property consultancy Knight Frank, a previous investor in the fund.
Other investors in the fund include European and Asian insurers, as well as UK institutional investors, including LGPS schemes and pools, including the Brunel Pension Partnership.
Investment focus
The Octopus Healthcare Fund, which was launched in 2017, now has £1.7bn of assets under management and is the landlord of more over 100 purpose-built care homes, with more than 7.500 care beds. The fund was delivering an 8.3% return on investment as of the second quarter this year, slightly above its 7.5%-8% target range.
The fund said its investments in the care sector were based on sustainable investment criteria, as well as care quality assurance and financial analysis. Developments use low-carbon energy and energy efficient construction. The fund recently received a five-star rating in the Global Real Estate Sustainability Benchmark for the third year in a row.
Mike Hardwick, investment director, property, at LGPSC, said the investment in the fund aligned with LGPC’s objective of delivering resilient, inflation-linked income for its partner funds while contributing to critical social infrastructure across the UK.
“The fund’s focus on quality care provision, strong responsible investment integration and stewardship approach made this a compelling opportunity for LGPS Central,” he said.
Hardwick told Impact Investor that, as well as offering defensive characteristics and long-term income streams, care home sector investments have become more viable for institutional investors because of recent improvements in the quality, regulation and transparency of modern care facilities.
Hardwick said the fund’s focus on high quality patient care, Octopus’ strong engagement with care operators, its commitment to energy-efficient, purpose-built facilities, and measurable social outcomes aligned with its own responsible investment principles.
Social investing push
As Gemma Bourne of Better Society Capital explained in Impact Investor recently, LGPS members across England and Wales have been encouraged to do more to invest in local communities and tackling social issues, following a UK government-led consultation with the sector, known as Fit for the Future, which closed earlier this year.
Sian Roberts, head of UK institutional sales at Octopus Capital said this was helping to bring in a more institutional investors to the fund, seeking attractive, risk adjusted returns, aligned with environmental and social outcomes.
“In particular, we’re really pleased to see more LGPS pool capital come into the fund, as they begin to execute on their ‘Fit for the Future’ proposals. We know that these pools are increasingly looking to invest in local growth and social infrastructure, so we look forward to facilitating that through both our existing suite of products, and through creating tailor-made private market solutions,” she said.
Octopus Capital is part of Octopus Investments, which has £9.8bn of funds under management, and of the wider Octopus Group, which includes renewables-focused energy firm Octopus Energy.
