Henley’s SIPUT II fund has raised £85m since 2022. Joe Quiruga speaks to Vicky Amlot, fund manager at Henley Investment Management, to find out more

SIPUT II is a supported housing fund investing local government pensions.

Amlot explains: “We manage the real estate, so effectively we have a property leased to a registered provider tenant, and the provider provides housing and tenancy management to individuals who have funded care and support packages, generally providing 24/7 support.

“We are in a way one step removed from the occupational tenants, but we do have a lot of involvement with the ongoing management of schemes.

“The first SIPUT was originally sold as a gilt-like income product, but it is more hands-on than a long-income product usually is.”

SIPUT II differs from its predecessor in several ways.

The first fund deployed around £440m into the market and launched in 2017.

Flexibility on lease terms has allowed us to bring in some of the larger G1, V1 RPs that operate within the sector

While the second fund’s investor base are all government pension funds, the majority of investors on the first fund were DB pension funds.

SIPUT I is now closed to new investment and has initial fund life until 2042.

Amlot said: “With the original fund there was an initial investment window with the stabilised portfolio now being held to generate cash flow for the pension fund investors.”

SIPUT II, on the other hand, is evergreen and there is not a fixed window for bringing in new equity. There is also a slight difference between how the rents are indexed, with leases on the first portfolio being linked to the annual CPI.

Amlot said the new fund is ‘flexed slightly’.

She explained: “Flexibility on lease terms has allowed us to bring in some of the larger G1, V1 RPs that operate within the sector.

“In the early days, when institutional investment was starting out in the sector, the leases were structured as 25 years with annual uncapped CPI linkage.

“But, from a financial viability point of view, that did raise some concerns from the regulator of social housing around the liability associated with those kinds of uplifts, because they wouldn’t necessarily be matched by the housing benefit funding stream over a 25-year period.

“What we have aimed to do in fund two is provide a cap on those increases.

“There are also clauses within the leases around change events – so, for example, if the Government implemented a below CPI increase on housing benefit the RP isn’t left with a shortfall.

“Government policy over recent years has supported CPI + 1% rent increases in the specialised supported housing sector and the government has indicated housing policy will continue with CPI plus one indexation for the next five years.”

Research has indicated a shortfall and growing need for supported housing with shortages across the country leading to delayed discharge from hospitals and the housing of vulnerable individuals in inappropriate settings.

Amlot said: “The cumulative time for delayed discharge, so people who are in mental health hospitals that are ready to move on, was something like 300 years for 2023/24.

“I mean, I think the average length of stay for someone with learning disabilities or autism, who has been in a secure unit, is something like five years.

“It’s not the kind of environment that is suitable for people that have those types of conditions.

Government policy over recent years has supported CPI + 1% rent increases in the specialised supported housing sector and the government has indicated housing policy will continue with CPI plus one indexation for the next five years

“We don’t do any schemes speculatively, though. We need to have the registered provider in place day one, and indicative housing benefit approval on rents on day one, too.

“A lot of local authorities we work with have even given us void agreements where they cover the rent of spaces where they haven’t referred anyone in. But this isn’t usually a problem as our occupancy rate is 94%.”

As well as providing a service for cash strapped authorities, Henley’s schemes have at least minimum EPC C and it has been able to incorporate a lot of As and Bs into the fund.

It also enables vulnerable adults to live somewhat independently and to keep them safe easing the strain on wider public services.