Over four in five (84 per cent) UK pension funds expect institutional investors to increase their exposure to the social care sector, research from Downing LLP has revealed.

The research, which was conducted amongst pension funds collectively responsible for around £102bn in assets under management, reported that this was being driven by a combination of “attractive” long-term returns and the opportunity to meet environmental, societal, and governance (ESG) objectives.

Another reason identified by the report for the expected increased institutional investment in social care is shortfall in public funding, which, according to Downing, has opened up a funding gap that is being increasingly occupied by private capital.

It was also revealed that 88 per cent of those involved in the research believed the commitment from local authorities and governments to social care provision assets demonstrates strong defensive attributes.

With this perceived increased interest in social care, Downing warned that institutional investors need to expand their understanding of the social care sector in order to deliver a positive social impact and sustainable returns.

Specifically, Downing warned that institutions entering the market need to be wary of a generalist approach and develop an understanding of factors influencing different types of care.

Downing LLP partner and head of development capital, Mark Gross, commented: “The sector demands a fundamental understanding of local supply and demand factors.

“In social care, putting in place 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.”

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