GLOBAL - Pension funds have been called upon to invest as much as £1bn (€1.1bn) into affordable housing in Scotland in an effort to meet the growing demand in the sector.
Speaking at the National Association of Pension Fund's Annual Conference in Liverpool, Alex Neil, minister for housing and communities in the devolved Scottish government, argued that there was demand for around 18,000 new homes each year, but that only two-thirds of those were currently being built by the private sector.
He said the remaining developments needed funding and called on pension funds - both in the UK and overseas - to help by investing between £500m and £1bn to help Scotland's housing associations to meet the challenge in a time of spending cuts across the country.
Neil said there were major benefits for any pension fund making such infrastructure investments, saying they were secured assets with a long life cycle, as well as offering an easy means of matching investments to pension fund liabilities.
"I'm not here asking you to do us a favour," the MSP told delegates. "I'm not asking you for charity. I'm asking you to come talk to us about doing a business deal.
"I also want to stress I'm not suggesting for a minute the Strathclyde pension fund in Scotland invest in housing in Strathclyde.
"What I want to do is appeal to the international market to invest in affordable housing in Scotland.
"We, quite frankly, don't care where the pension fund is based, as long as you come and invest with us, we will be glad to do a deal and invest your money wisely."
He said they were not looking for investments of £50m or even £100m to start and that they needed between £500m and £1bn to meet the current market demand.
"We are open to business for the pension funds," the minister concluded.
Mark Weisdorf, managing director of JP Morgan Asset Management's Infrastructure Investments Group, added that the need for improvements to the infrastructure had far outstripped investments over the last few years.
He predicted that, in future, £30bn worth of investments would be needed annually.
Weisdorf added that such investments were good for risk sharing, but that pension funds should avoid directly investing in a project and instead work through an intermediary, which echoed Neil's sentiment that Strathclyde's local government pension scheme should not directly invest in projects in the area.