1. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
Social Housing
Infrastructure, Social Housing & Property Investment Conference
Robert Gardner
27th June 2013
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2. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013 2
Managing the End Game
Greatest Challenges Facing Pension Funds

3. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
Managing the End Game
The Seven Steps to Full Funding
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Design an efficient
investment strategy
Destination for agile
hedging strategy
Transparency to make
timely decisions
Articulate clear objectives
and constraints
Mission Statement
To help our clients achieve full-funding with the minimum level of risk
CLEAR GOALS &
OBJECTIVES
ACCESS TO LDI
HUB
LIQUID ALPHA & BETA
STRATEGIES
LIQUID & SEMI-LIQUID
CREDIT STRATEGIES
ILLIQUID CREDIT
STRATEGIES
ILLIQUID ALPHA & BETA
STRATEGIES
ONGOING
MONITORING

4. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013 4
LDI 1.0
Liability Immunisation
LDI 2.0
The LDI “Manager”
LDI 3.0
Holistic ALM
Managing the End Game
Integrating Social Housing into your LDI Strategy
Interest rate swaps
Nominal gilts
Inflation swaps
Index-linked gilts
Gilt repo and TRS
Swaptions
Unfunded asset exposures
Corporate linkers
Sophisticated option
overlays
Flight Plan Consistent
Assets

5. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
Managing the End Game
Seven Steps to Traditional Asset Classes
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Step
(2)
LDI
(3)
Liquid α & β
(4)
Semi-Liquid Credit
(5)
Illiquid Credit
(6)
Illiquid α & β
Collateral
Management
Equities Corporate Bonds Infrastructure Debt Insurance-Linked
Hedging Multi Asset
Asset Backed
Securities
Social Housing Debt Private Equity
Active LDI Sovereign Bonds High Yield Direct SME Lending Infrastructure Equity
Gilts Commodities / CTA Leveraged Loans Mezzanine Finance Unlisted Property
Currencies
Emerging Market
Debt
Distressed Debt
Hedge Funds with
Longer Lock-Ups
Liquid Hedge Funds
Commercial Real
Estate Debt
Long Leases /
Ground Rents

6. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
Managing the End Game
The Role of Liquid and Illiquid Credit
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Corporate
Bonds
Direct
Lending
Corporate
Linkers
Infrastructure
Debt / Long
Leases / Social
Housing
Infrastructure Debt / Social Housing
Gilts
Cash

7. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013 7
Secured Leases Social HousingInfrastructure Ground Rents
LDI 3.0
LDI 1.0
LDI 2.0
LDI 1.0
LDI 2.0
Managing the End Game
Integrating Social Housing into your LDI Strategy

8. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013 8
• Access to high-quality, inflation-linked
cash flows offering attractive real yields .
• Accessing such returns in traditional ways
has become increasingly difficult in the
recent market environment.
• Pension funds will also take into account
additional considerations such as the
investment structure and the risk/return
profile of each specific investment.
Benefits for Pension Funds
• Opportunity to access a new and
potentially large source of financing
with a long-term horizon.
Benefits for Housing Associations
Win/Win Opportunity
Managing the End Game
Why Invest in Social Housing?

9. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
Managing the End Game
Investing in Illiquid Assets
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Source: Red Manager Forum Survey

10. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
Social Housing is a form of low cost, rental housing
typically provided by local councils and non-profit
organisations called housing associations.
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• Housing associations issue inflation-linked debt
secured on a pool of housing units to finance activities
• Interest payments are matched by rental income that is
typically increased yearly at RPI + 0.5% (the legislation
indicates this may change).
• Illiquidity gives rise to a premium return over publicly
traded bonds by the same or similar issuers.
• Enjoys a large degree of government support, with
rental payments often heavily subsidised
• Combines social responsibility with returns
Social Housing investment features
Background
• Traditionally financed by state support and bank loans
• The financial crisis imposed losses and higher capital
requirements on banks, limiting their ability to lend
• The government has proclaimed an era of fiscal
austerity and is reducing spending
• This ‘funding vacuum’ has given pension funds an
opportunity to step in and provide financing
Managing the End Game
Background to Investing in Social Housing
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11. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
Managing the End Game
Investing in Social Housing
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Pension Fund
Investor
Registered Social
Landlords
Capital
Interest payments
Rent
Payments
(linked to
inflation)
Capital used
to fund and
maintain
social houses
Indicator Private Social
Proportion of household
reference persons (HRP) <
35 yrs old.
50% 20%
Size of sector (number of
households)
2.5 mm 4.0 mm
Mean weekly gross incomes
(HRP + partner)
£493 £247
Mean weekly rent £136 £72
Median length of time in
current residence
1.5yrs 7.8yrs
Proportion of tenants
receiving housing benefit
21% 62%
Proportion of HRPs working
full time
61% 22%
Benefits
Secured Lending
LDI Hedging
Implicit UK government &
regulatory support
Socially responsible investment
Source: Housing in England 2007-08 Report published in Sep-2009 by Communities and Local Government

12. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
Managing the End Game
Accessing Social Housing through Pooled Opportunities
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Range of Assets:
• Social Housing
• Infrastructure
• University Assets
• Commercial Assets
• Ground Rents
Returns Enhancing and Liability Matching Assets (REaLM) Social Housing Fund
Range of Assets:
• Social Housing
Asset/Fund Features:
• Maturity: 20-50+ years
• Inflation linked
• Illiquidity premium
• Typically equity stake
• Higher public sector
exposure
Asset/Fund Features:
• Maturity: 30-40 years
• LPI linked
• Illiquidity premium
• Debt stake
• Focus on Registered
Social Landlords

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Source: Canaccord Genuity, Redington
Social Housing
Risk and Return Profile
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Mix of Social Housing Type

14. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 201314
Social Housing
Regulatory Concerns
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- Recent political discussion has been erring towards government legislation that will change the inflation linkage of
the rental income from social housing from RPI to CPI. The repercussions of this change are twofold:
• Ratings agencies may decide to downgrade social housing debt.
• Investing in social housing is no longer a direct hedge for pension fund liabilities.
- European legislation has changed the way the government pays grants and provides support in the form of housing
allowance. Instead of paying the Registered Social Landlord (RSL) directly some of the money is now paid to the
tenant. This creates a risk that the money does not reach the housing association and therefore presents a risk to the
borrower.

15. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
13-15 Mallow Street London EC1Y 8RD Telephone : +44 (0) 20 7250 3331 www.redington.co.uk
Contacts
Robert Gardner
Founder & Co-CEO
Telephone: +44 (0) 20 7250 3331
robert.gardner@redington.co.uk
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16. Private & Confidential Infrastructure, Social Housing & Property Investment 27 June 2013
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