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Pension fund giant Legal & General is on track to turn an annual profit of £600M from its alternative assets business by 2025 as it continues to direct significant capital into different forms of housing, commercial property and technology to combat climate change.
Legal & General Capital, the pension fund manager’s alternative assets business, said it had committed £5B of capital in 2022, including expanding into U.S. real estate for the first time. That figure is a significant increase on its 2021 commitment.
LGC is producing returns of around 10% to 12% per annum across its key focus areas of housing, small and medium-sized enterprise finance, specialist commercial real estate, digital infrastructure and clean energy, it said.
In 2022, LGC’s commitments included backing the delivery of more than 17,000 new homes across affordable housing, suburban build-to-rent, modular housing, traditional build-to-sell, and key worker homes. This has been done through its £4B partnership with Oxford University and new joint venture models, such as a 3,000-home partnership with Lovell and a 2,500-home partnership with Metropolitan Thames Valley Homes.
The company said it is also continuing to invest in urban regeneration schemes, including LGC’s multibillion-pound commitment with the West Midland’s Combined Authority and new science and tech infrastructure through Bruntwood SciTech’s first Scotland-based scheme, Glasgow Met Tower.
It is also expanding into the U.S. for the first time, creating a major life sciences and technology platform across regional markets through a new business, Ancora L&G, which will invest up to $4B in U.S. life sciences real estate over the next few years.
“With an increasingly uncertain picture over the next 12 months, it’s essential that financial institutions continue to invest in the real economy, recycling pensions funds and savings into projects that help to create jobs, housing and vital infrastructure,” Legal & General Capital CEO Laura Mason said. “Despite headwinds, our appetite to continue to invest globally, alongside other institutional partners, remains strong for 2023”.
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