KGAL impact fund targets housing and climate crises

Investment manager KGAL’s new Core 5 Life fund is one of only a few impact funds in Europe so far. It is a pan-European residential fund and one of the major themes that it addresses is the housing crisis in Europe.

“There’s a quite a big imbalance between demand and supply in all of the metropolitan areas in Europe and the situation is getting worse,” portfolio manager Philipp Langbehn explained.

He said that inflation and increasing financing costs will reduce development activity while projections indicate that 13 million new households will be formed by the end of 2040 in Europe.

“The situation’s really getting worse, especially for the younger generation who cannot afford a home or have problems in affording to rent a unit.”

The other major theme that the fund aims to address is the climate crisis.

“We are focusing on affordable housing and also on creating energy efficient residential space,” Langbehn said.

“Feedback from our investors is very positive, especially because the fund is combining big demand for residential as well as the increasing demand for Article 9 funds, or ESG funds, in the fund universe.”

The fund’s first acquisition was in Malaga which, although not an obvious choice is Spain’s sixth largest city. “It is a very dynamic macro location, there have been a lot of tech companies opening branches there and there’s big household growth.”

There is a big imbalance between demand and supply, partly because all of Spain is dominated by owner occupiers.

Langbehn said the particular property provides a good yield spread comparing Malaga to Barcelona or Madrid, and has good environmental and social scores from an ESG perspective.

Please click on the video above to watch the full interview or listen to the podcast below.