2011 launch for £1bn loan fund
An innovative £1 billion vehicle to encourage pension funds to make loans to housing associations is expected to start lending in January.
Fund manager M&G Investments, owned by financial services provider Prudential, will from next month attempt to sign pension funds up to the scheme, which offers index-linked returns on 30 to 40-year loans.
The scheme will offer loans to housing associations next year.
William Nicoll, manager of the fund, said he was confident both pension funds and housing associations would be interested.
He said: ‘Pension funds are a natural lender to housing associations because their pay-out is linked to inflation, as is associations’ rent.’
The scheme was designed to appeal to associations wary of inflation-linked borrowing, with debt service payment increases capped at 5 per cent.
Piers Williamson, chief executive of the Housing Finance Corporation, described the fund as a ‘good thing’ but doubted whether associations had an appetite for index-linked borrowing at the moment due to economic conditions and uncertainty over grant.