Ahead of next month’s LGC Investment & Pensions Summit in Leeds, six questions with M&G Real Estate’s head of UK and European living. Book your place at the summit here.
What is the biggest challenge currently facing the Local Government Pension Scheme?
The LGPS face several challenges, particularly around attracting the right talent, striving to ensure their investments are income producing, decreasing the carbon footprint of their portfolios, and reducing their administrative burden, resulting from ever evolving and complex regulation. With respect to their real estate allocations, we believe that one of the biggest challenges for the LGPS relates to pooling. These pools are developing at different rates, with some more advanced than others. Therefore it can be difficult for the LGPS to implement strategic real estate recommendations or strategies effectively, whilst waiting for their respective pool to provide a suitable, diversified offering.
From your viewpoint, what do you think the pandemic’s biggest impact has been on the LGPS?
From a real estate perspective, the pandemic has accelerated several pre-existing structural trends, triggering a potential need for the LGPS to reshape their portfolios. Many are looking to reduce office and retail allocations and increase their exposure to logistics and alternative real estate sectors. Due to growing demand and limited supply of quality logistics, however, investors are increasingly targeting residential property. By nature, this sector has proven resilient throughout the pandemic, offering a defensive investment opportunity with strong income potential and the benefits of portfolio diversification.
What has been your organisation’s biggest challenge during the pandemic?
We are a very people oriented team, therefore our biggest challenge – likewise for our investor pool – has been to adapt from working closely in person, to staying connected remotely. However, we recognise how fortunate we are to be invested in a part of the market that has taken centre stage in peoples’ lives throughout the pandemic, as manager of the UK’s largest institutional residential property strategy.
In your area, what are the most important things LGPS funds and pools can do to combat climate change?
Gain a detailed understanding of what managers are doing. Despite widespread greenwashing, the opportunity to do great things from a climate perspective is still young. We believe that getting into the detail is a proactive initial step; ascertaining whether a manager is targeting more efficient buildings through use of solar panels, ground source heat pumps, or green utilities, for example. Alongside climate action, we also believe it is important to focus on making a positive impact on occupiers and society, as part of a responsible approach to property investing.
What are you most looking forward to about the return of the physical LGC Investment & Pensions Summit in September?
Not having to use the words, ‘you’re on mute’!
What do you hope the audience will be able to take away from your contribution to this year’s LGC Investment & Pensions Summit?
A better understanding of investing in residential, which is a hugely emotive sector and one which almost everyone has an opinion on. If schemes don’t already have an allocation towards ‘beds’, we believe they should think about why not, for numerous reasons. We would invite trustees to engage in a more detailed, follow up session, or visit any of our private rented schemes in person, to gain a comprehensive insight on what the sector can offer both customers and investors.
Alex Greaves, head of UK and European living, M&G Real Estate
Alex will join a panel discussing ‘housing private or affordable – where are the opportunities and where are the risks?’ at the LGC Investment & Pensions Summit on 9-10 September. View the programme and book your place here.