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Care Homes Reading time: 4 mins

Building portfolios that are fit for the future: the case for the UK private care sector

14 Sep 2023

As the adage goes, by failing to prepare, you are preparing to fail.

It is a message that might resonate with long term investors. They must construct resilient portfolios today that can maximise future opportunities and withstand future threats, rather than react to change, at which point it may be too late.

Looking after any portfolio requires an understanding of what is fit for the future.

Climate risk is an obvious example which receives plenty of airtime in the industry. We ask ourselves how prepared assets are to perform in a climate emergency, and what can be done now to ensure resilient ongoing performance.

But there is another significant shift that will have a dramatic impact on portfolios.

The world has an ageing population problem

By 2030, one in six people in the world will be aged 60 years or over. By 2050, the number of over 60s will have doubled to 2.1 billion. And between 2020 and 2050, the number of over 80s will have tripled to 426 million.1

The UK is not immune to this. In fact, the number of people over 85 in the UK is expected to have doubled by 2040.2

This is going to have a wide-reaching impact on society and, of course, the world of investing. It will affect everything from businesses (for example, the goods and services they sell may change, and the availability of talent may change), to the demands placed on of infrastructure, especially health and social systems.

The UK care sector is one area that will feel the impact of our ageing population directly and intensely. Institutional capital can play a role in building a care sector that is fit for the future. At the same time, investors can build resilient portfolios by gaining exposure to a sector with enormous tailwinds.

The UK’s care challenge

The UK is facing a shortage of quality care homes. A longer-living population will correspond with an increase in care needs, and the existing infrastructure is not yet fit to cope.

Half of the UK’s care homes were registered over 20 years ago3, meaning many facilities are obsolete, lacking the quality of real estate needed to deliver best-in-class care. Many, for example, suffer from inefficient design, a lack of wet rooms and poor ESG credentials.

For this reason, many care homes have been forced to close, further exacerbating the shortage of quality care in the UK.

To meet the needs of the future, the existing care system will need to look radically different. And institutional investors will surely play a part in that transformation.

Private capital is helping to transform UK care

The UK care sector is an attractive area for investment.

The difficulties the sector faces are creating the dynamics where investors can simultaneously make a social impact and meet their need for predictable income.

Due to the combination of an ageing population and short supply, it is a sector with pent-up and rising demand that can generate a stable yield throughout the economic cycle.

At the same time, investing institutional capital in this sector has the power to meaningfully raise the quality of care across the UK.

But for the UK to move forward, it must build care homes that are fit for the future. For this to happen, investment needs to happen in the right way and be focused on achieving the right outcomes.

Building tomorrow’s care homes

Private capital can focus on constructing high-quality, purpose-built homes that you would choose for your loved ones.

Picture a home equipped with cutting-edge technology, an ensuite wet room, complete accessibility, and powered by renewable energy. These are the homes that have the potential to revolutionise the care experience.

But how can the industry accelerate the development of homes like these?

Three crucial pillars should underpin investment in the sector:

  • High standards of care: Investment managers must have the necessary skill set to work with operators to uphold the highest standards of care and maintain strong governance. Ideally, a partnership model would be adopted to create efficiencies and drive best practices across a portfolio.
  • Effective management: Getting the best outcomes in the healthcare sector hinges on a highly experienced team that can equally prioritise clinical, sustainability, and financial considerations. Investment in the sector must be structured to deliver over the long term, for example, through long-term inflation-linked leases, sustainable rents, and robust financial covenants.
  • A commitment to sustainability: Care homes are a perfect example of an area where infrastructure development can help meet the Net Zero vision and consider climate risk. Investment managers should be committing to new and existing developments becoming carbon neutral.

Our approach to healthcare

We’ve invested in the care sector for over a decade, with a track record spanning care homes and retirement communities.

We’re proud to have an in-house clinical assurance team, leveraging their expertise to enhance care infrastructure across the UK and deliver exceptional outcomes for our investors.

Our healthcare strategy focuses on two main areas: elderly care homes and specialist healthcare. The overarching goal is to provide investors with long-term, secure income while positively impacting the healthcare sector and broader society.

There’s currently a pressing need to improve the quality of care and expand capacity within the UK care system.

Institutional capital can help modernise infrastructure, raise standards of care in the UK, and champion sustainability to meet net-zero targets. Our strategy is designed to facilitate that. 

Interested in healthcare?

Talk to one of us.

If you are interested in investing into healthcare, or other alternative investments, we would love to hear from you. Please fill out the form below and we will be in touch shortly to arrange a time for further discussion.

1 World Health Organisation, October 2022

2 Care of Older People, UK Market Report, 31st Edition, LangBuisson, 2022

3 Care of Older People, UK Market Report, 33rd edition, LangBuisson, 2023


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