Schemes to invest in social housing

An M&G fund to arrange loans between schemes and housing associations is close to securing a commitment from at least one scheme client.

The vehicle aims to offer index-linked yields, based on rent from the properties, over long-term loans, which will go into building further social housing stock.

An exact launch date and seed level for the product has yet to be decided, but it will be managed by M&G fixed income director William Nicholl.

It will operate in a similar fashion to the credit specialist asset manager’s UK Companies Financing Fund, launched last year to provide an alternative to bank loans for businesses, and which lent its first money last week – £100m to freight firm Stobart.

M&G is working with pension consultants Redington and stockbrokers Evolution Securities to engage with schemes and housing associations.

Redington chief executive Rob Gardner claimed the launch is aimed at “kick-starting the market” for loans from pension funds to affordable housing projects.

“I’m pretty sure once this is underway, there’ll be a lot of take-up for it,” he said. “From the fund’s point of view, it offers attractive yields and does some social good, too,” he said.

Nicholl added: “We think there is a very interesting match between pension funds’ long-term needs and social housing providers’ long-term needs.

“As fund managers, we will use our expertise in credit to set up the structures of these loans.”

And Evolution debt advice director Henrietta Podd said: “It is an alternative to housing providers borrowing from banks, and we are talking to these associations about how these loans are to be structured.”

The UK Companies Financing Fund’s Stobart deal will see the company taking a 10-year, £100m loan for a raft of spending measures, including a new runway for Southend Airport.

M&G alternative credit chief Mark Hutchinson said: “We are in discussion with several companies about further investments.”