Agenda item

This paper provides the Pension Fund Committee with an overview of a local impact investment opportunity in the Resonance Impact Evergreen Fund.

Phil Triggs (Director of Treasury and Pensions) introduced the report which sought the Pension Fund Committees decision on whether to invest in Resonance subject to further due diligence from Isio. Appendix 1 outlined the due diligence undertaken by Isio on the Resonance proposal, including a summary of the portfolio and its principal objectives.

The Committee received a verbal presentation from Gary Walker and Simon Chisholm, Resonance representatives. Resonance looked to alleviate the nationwide issue in the UK of a lack of temporary accommodation. Resonance sought returns through balance on the rental yield and appreciation on the value of the properties. Local housing allowance was linked to inflation in the long run. The investment met the objective of achieving local status, while also contributing to the wider London housing challenge by increasing local supply. The outcome aligned with the government’s objective of supporting UK local investment. They provided an overview of the impact Resonance had achieved through its previous and current funds, demonstrating tenant-first design approach. The Fund aimed to deliver a 6% internal rate of return (IRR) on a rolling ten-year basis, alongside a targeted 3% distribution yield, thereby generating secure income for the pension fund.

The Chair opened the discussion by enquiring whether Resonance had any properties in Hammersmith & Fulham (H&F). Gary Walker (Resonance) confirmed that two properties were held within H&F, with several more located in neighbouring boroughs.

The Chair asked if investment from the H&F Pension Fund (H&FPF) could enable further investment within the borough. Simon Chisholm (Resonance) confirmed this to be the case and suggested agreeing a geographical distance from the borough, targeting equivalent investment in that area. The aim was for 60% of investment to be in adjacent boroughs, 10% within H&F, and the remainder within a 45-minute travel radius. The Chair wondered whether other areas investing locally, would benefit H&F indirectly. Simon Chisholm agreed with this assessment.

Councillor Adam Peter Lang raised the importance of ethical investment and achieving the best possible returns and asked whether there was anything that could be deemed to be sensitive included in the fund. Simon Chisholm stated that there were no known sensitivities within the fund and emphasised the need to work with appropriate housing partners, as issues could arise from working with unsuitable ones. Councillor Lang asked whether there were any restrictions regarding housing certain individuals. Simon Chisholm clarified that tenants were referred by the Local Authority. Gary Walker added that the fund operated as a social enterprise and was not-for-profit.

Michael Adam (Co-Optee) asked whether closed discussions would be held on the matter. The Chair confirmed that this was possible. Michael Adam queried whether the proposal had been discussed with London CIV (LCIV). Phil Triggs responded that officers had engaged with LCIV, who had expressed initial concerns in the investment, while still conducting due diligence. LCIV had expressed doubt regarding the initial projected return of 3%, and were continuing to assess the proposal.

Michael Adam asked whether it was a good time to increase exposure to UK real estate, with movements in UK Gilt yields. Andrew Singh (Isio) explained that the composition included various types of property investment. Isio’s preference was for investments with strong inflation linkage. Over the long term, returns were expected to be linked to inflation. Andrew Singh noted that volatility in interest rates had affected commercial real estate and that Environmental, Social and Governance (ESG) considerations were a key driver, although returns remained modest.

Sam Gervaise-Jones commented on the strategic trade-off between impact and return, which was relatively poorly defined and left to individual investment committees to determine. He expressed support for the commitment and shared his experience with Resonance, suggesting that the yield/impact trade-off should be considered in the medium term. He queried the shift from close-ended to evergreen funds. Simon Chisholm explained that the fund had started with short-term investments in 2013 but had since recognised a long-term need. The evergreen structure was deemed more appropriate, allowing indefinite holding and flexible entry and exit based on market norms. Simon Chisholm noted that issues had arisen when mixing long and short-term investors.

Sam Gervaise-Jones referred to Isio’s mention of a £200 million fundraising target and asked how likely this was to be achieved. Gary Walker confirmed that they were confident in reaching this target, with presentations being made to multiple Local Government Pension Schemes (LGPS) and insurance companies. Gary Walker added that £100–£120 million was expected to be invested by current investors at the end of the year.

Councillor Lydia Paynter asked how many LGPS funds had invested and whether a specific target was in place. Gary Walker explained that Croydon had been the first LGPS investor in 2013. Between 2020 and 2025, four LGPS funds had participated: Greater Manchester, South Yorkshire, Gloucestershire, and Hackney. The GLA had also invested. Gary Walker stated that the target was to secure four to six LGPS funds over the next year and that discussions with LCIV were ongoing to resolve outstanding issues.

Michael Adam asked where liquidity would be sourced to go ahead with this investment and whether relative value had been explored against other affordable housing schemes. Andrew Singh explained that at the moment, looking at how the investment could be funded was not part of the due diligence that had taken place. Given the way asset allocation was structured, the fund would be a suitable fit in the inflation protection or secure income group of investments. Andrew Singh noted that the fund was due to launch later in the year, allowing time for further decision-making.

The Chair concluded by proposing that the matter be revisited in an exempt session.

RESOLVED:

That the Pension Fund Committee agreed to defer this decision to a future meeting, where they would receive an updated report which would include due diligence from Isio with all stages complete.