Hermes, the investment manager owned by the BT Pension Scheme, has launched a UK residential fund with estate agency Countrywide.
The fund has been seeded with £95m (€120m) in capital and Hermes Investment Management will seek to raise additional third-party capital and leverage.
It will invest in the private-rented sector (PRS) in the UK, including existing properties and developments. The seed capital has been allocated to three assets in Manchester, Birmingham and Nottingham.
Hermes said the fund will aim to provide ”high quality, well maintained and professionally-managed homes, in places where they are needed most”.
Countrywide, which currently has more than £6bn of real estate assets under management, will source assets for the fund.
Chris Taylor, chief executive of Hermes Real Estate, said the investment thesis within UK residential for long-term investors “remains compelling”, with a ”major imbalance between supply and demand”.
He said: “The major constraint to institutional investors has been the lack of a quality operator and access to stock.”
Hermes said the partnership will aim to provide institutional investors with “potentially compelling net yield and long-term capital growth”. The manager said UK PRS is an opportunity to benefit from current demographic trends as well as the institutionalisation of UK residential lettings.
Graham Bell, finance director at Countrywide, which owns advisory firm Lambert Smith Hampton, said the fund will look to overcome barriers to institutional investment in residential property and overcome the difficulty in finding areas with “attractive and sustainable yields”.
He said: “We have chosen to partner with Hermes because they think about the opportunity in UK residential property in the same way.
“They have immediate access to significant investment capital combined with an international client base for future fundraising.”