Hearthstone Investment Management has raised £97m (€106m) for the first close of its second UK residential fund, drawing commitments from three UK local government pension scheme funds.

Lincolnshire Pension Fund, South Yorkshire Pensions Authority and Tyne & Wear Pension Fund all committed to Hearthstone Residential Fund 2 (HRF2), a 10-year closed-ended fund seeking to raise £300m to invest in the UK private rented sector.

Jo Ray, head of pensions at Lincolnshire Pension Fund, said: “We were keen to invest in the residential sector, and in particular into a strategy involving houses and small block of flats. We were greatly impressed with Hearthstone’s track record and approach.”

Hearthstone raised £200m for its first residential fund, which is now fully committed with almost 1,000 residential units throughout the UK. Seven UK local authority pension funds, including Tyne & Wear, are investors in HRF1.

Richard Otten, head of asset management at Hearthstone, said: “We are delighted that institutional investors continue to have confidence in the residential sector and in our ability to source and secure high-quality residential assets.

“We have built up a strong track record of partnering with leading housebuilders to deliver the types of homes people want, at rents they can afford, and in the places they need them.”

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