Swiss Life Asset Managers plans to grow its assets under management from £1.9bn to £5bn by 2030 by focusing its resources on four L’s: Living, logistics, life sciences and light industrial.
Speaking at a briefing in London last week, Giles King, chief executive of Swiss Life Asset Managers UK, said: “Those [are] the areas where we think there will be strong income performance and strong growth. So that’s really the focus of what we’re doing.”
As part of the push for growth, the company is also looking to grow its Property Income Trust for Charities. The fund currently has £528m of assets under management and advises more than 1,000 charities, including St Bart’s Charity and Christ’s Hospital – the latter of which appointed Swiss Life as an investment adviser to manage its £120m UK commercial property portfolio earlier this year.
“I think we’ve got a bit of a USP in terms of being able to attract that capital, given our long-term track record of managing charity assets,” said Simon Martindale, fund director for PITCH.
“Actually, when we broke it down as a management team, we said, ‘Let’s be realistic and think, how do we get to £5bn?’” King added. “Putting no extra pressure on Simon, we’ve said, ‘If you can add another half billion over the next five years and get to a billion, that would be your job done.’”
Riding the wave
Set up in 2004, Martindale said PITCH has survived “horrific” markets – the global financial crisis, Brexit, Covid and, more recently, high interest rates – without ever gating the fund for liquidity or missing a quarterly redemption flow.
“We’re really proud of that. We are one of the few [charity] funds that can say that,” he added.
The fund, which delivered a return of 7.4% over the past year, is similarly mostly focused on the four Ls, with a particularly heavy exposure to light industrial at 46%.
Martindale said the fund is looking to reduce its office exposure to a fifth of its portfolio by the end of this year, while pushing for greater exposure to residential, its biggest growth area. The fund launched a strategy in 2022 to invest in single-family housing and its allocation is coming up to around 5% of its portfolio.
He said the decision was motivated by the sector’s appealing rental growth prospects, as offices and retail have become less attractive and the fund looks for a viable alternative with consistent income and occupancy.
He said the company prides itself on its progressive strategy, which focuses on identifying market trends and moving proactively to capitalise on them.
Shaping British culture
In 2021, that meant biting the bullet and selling out of underperforming assets, many of them offices.
“We’ve been quite actively net sellers over the past five years,” he said. “We’ve sold £240m of assets over the past four to five years. A lot of those were offices and, selling into a market in 2021, we felt the time was quite challenging.
“But what’s really interesting is to look at the prices achieved, and I’m really pleased we did that because some of those assets would be worth a lot less today. And I think that’s the benefit of being a very active manager, not being passive and not sitting on our hands.”
And now, Tim Munn, chief investment officer at Swiss Life, said the company is looking to be progressive in living by offering an alternative to an “obsession” with homeownership.
He said government policies over the past 50 years or so, such as Right to Buy, have shaped UK culture, leaving people “desperate to own a home” and break away from renting. Meanwhile, in other countries, such as Germany, lifelong renting is seen as a perfectly palatable option.
“It needs to change and it is changing,” he said, pointing to PITCH’s single-family housing investments as an example.
Martindale said the fund generally looks to buy between 10 and 20 two-to-four bedroom homes from housebuilders at a time, at a price point of between £200,000 to £400,000.
“The target really is lower-income households that have been priced out of buying their own homes. The idea is that we’re planning to hold these long-term, 10 to 15 years, so we have to make sure we’re buying the right quality,” he said.
That means EPC A-B buildings, with the right heating and cooling systems, because “ultimately it will bring down household bills for these lower income renters”.
While the ONS describes an affordable rent as 35% of a renter’s salary, Martindale said the average across PITCH’s portfolio is 28%: “That’s a really important measure, particularly when you have quite high rental value growth. You want to make sure that those rents are still affordable not just now in two-to-three years.
“Generally speaking, most tenants renew, which is quite good, albeit that you tend not to see the growth on renewals that you see on open market lettings.”
But he said the sacrifice is worthwhile.
“Ultimately, we’re delivering housing for a sector of the population that probably needs the housing – so we want to take a bit more of a philosophical view around rental growth.”
Giles King image © Swiss Life Asset Managers UK
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