You know the old saying ‘safe as houses’ – well it’s still as relevant today as it was back then. Of course, we can’t take it too literally when talking about investments, but there’s something to be said about the benefits of having property in an investment portfolio – it’s generally seen as an attractive, long-term investment*.
We invest your pension contributions to make sure we’re able to pay you the pension you’ve earned. We make investments with long-term goals in mind and property is a perfect example of this due to its stable returns.
95% of the property we invest in is located here in the UK, so you could be more familiar with our investments than you may think.
With £4bn invested in supermarkets, nurseries, hotels, industrial estates, residential property, offices, petrol filling stations and more, there’s lots of property across the UK working hard for your future.
You may think that investing in property means we just buy and sell it. But that’s not what being a long-term investor is about. We do buy and sell of course, but we also create value through active management. This means that we have a say in the decision-making that goes on at the majority of our properties, such as who we let them to and how they address things like climate change. We can drive decisions that are in your best interest.
It’s important that we add value to our properties where we can by closely managing them. We do this by refurbishing, redeveloping or re-letting them. This active management helps to drive higher returns from our investments, rather than us just sitting back and waiting for the rent to come in.
But we consider more than just the building itself. We also look at the impact of environmental, social and governance (ESG) issues. On the larger properties that we’ve owned for 10 years or more, like offices and shopping centres, we’ve reduced our energy consumption by over 40%. As well as that, 97% of the energy used in the properties we own is certified as coming from renewable sources, and we’ve been doing this for a while now.
We’re very focused on ESG issues. We really believe that the way properties are managed and overseen, and how their environmental and social risks are managed, will impact the long-term financial returns that it will generate for you.
On the topic of driving long-term financial returns for our members, we always look to develop our investment strategy too. We’ve launched a new strategy to invest in properties that provide us with specific inflation linked rents. This gives more security for your pension, as our income will increase with inflation over time, regardless of the market value.
That’s not the only change to our investment strategy, whilst we invest in property across both parts of USS (the Retirement Income Builder and the Investment Builder), it used to be managed externally for the Investment Builder. We’ve recently started to bring our property investments in-house for this part too, so by the end of 2021, they’ll all be managed under one roof. Having one internal property team means we can select property assets that are aligned with our members’ needs and we can offer better value for money.
So, while ‘safe as houses’ can’t be taken too literally, a well-managed, strategic property portfolio really adds value to our members and their pensions. And, chances are, you’ve been to some of the property that’s working hard for your future.
*Just like all investments, property values can go up or down depending on the market.
Private Markets Group is the team behind our property investments. Set up in 2007, it now consists of nearly 50 professionals from a wide range of background and experience.
Published: 18 March 2021