More than eight in 10 UK pension schemes expect to increase their investment exposure to the social care sector, according to a report by Downing.
Research with UK pension funds collectively responsible for around £102bn in assets under management, found 84% expect institutional investors to increase their exposure to the social care sector.
The report, Emerging Trends in Social Care Investing, highlights how institutions are increasingly recognising the role of private capital in providing social care.
The care sector is seen as a reliable investment by 88% of UK pension schemes, which believe commitments from local authorities and government to social care provision demonstrate the strong defensive attributes of the sector.
It includes elderly care, dementia and supported living to specialist needs education.
More than half (54%) of respondents believe the social care sector is poised to benefit from institutional investors shifting focus to the ‘S’, social, aspect of ESG investing.
Downing’s report identifies a key reason for institutional investment in the sector is the shortfall in public funding, which has opened up a funding gap that is being increasingly occupied by private capital.
To deliver a positive social impact on the sector, and sustainable returns, Downing cautioned institutional investors to expand their understanding of it as interest in the asset class grows.
Social care specialisms
Social care is about micro market provision and success comes from a combination of operating capability, quality of property, and management, according to the report.
Investors should not consider it as one homogeneous group. Different areas have different drivers and are sub-sectors in their own right.
For example, one of the legacies of the Covid-19 pandemic has been a shift in the type of demand for elderly care. Care home businesses are now seeing more later-in-life patients with higher acuity need, the report says.
Mark Gross, partner and head of development capital at Downing, said: “The sector demands a fundamental understanding of local supply and demand factors.
“Experienced management teams that have a strong understanding of local market dynamics and the requisite expertise to operate high-quality assets, continues to be the best way of generating long-term sustainable returns, avoiding reputational risk and creating a positive social impact.”
