M&G Investments has launched a shared ownership fund that plans to deliver £500m of new sustainable and affordable housing.

The M&G Shared Ownership Fund is a partnership with M&G and Hyde Group. It was created in response to the funding challenges faced by housing associations in ensuring existing homes are safe, sustainable and meet the requirements of the government’s net zero carbon agenda.

It will enable M&G to buy existing stock and fund Hyde’s development pipeline, allowing Hyde to recycle capital into new homes and other affordable housing initiatives.

Launched with a £215m investment from Cambridgeshire and Northamptonshire Local Government Pension Schemes, Homes England and two M&G client funds, alongside Hyde, the fund has already acquired 422 homes from Hyde in London and Kent for £61m.

The fund is part of M&G’s residential platform and is managed by Alex Greaves and Chris Jeffs.

Greaves said: “We are determined to play our part in addressing the UK’s housing crisis by providing a mix of housing tenures through our residential capability.

“Well-managed shared ownership is a brilliant first step onto the housing ladder for aspirational home owners and as trusted investors with access to deep pools of client capital, we are fully committed to innovating and improving standards – adding scale and efficiency to the fund.

“Working with an organisation of Hyde’s calibre, which shares our social and environmental values and aspirations, is a perfect blueprint for how the private and public sectors can combine forces to make a positive impact on this underserved sector. We look forward to growing our partnerships and funding high-quality housing – and in time with other organisations.”

Paul Tysoe, investment manager for both the Northamptonshire and Cambridgeshire Local Government Pension Funds, said: “For income-seeking investors such as pension funds, shared ownership offers another means of diversification due to the sector’s low correlation with other asset classes and long-term, inflation-linked income with exposure to house price growth.

“Having invested in M&G’s UK Residential Property Fund since 2017, we have the comfort of its track record, expertise and environmental, social and governance (ESG) credentials and we welcome the positive social impact that this new fund represents.”

Peter Denton, chief executive officer of the Hyde Group, said: “Hyde, like all housing associations, faces multiple funding challenges to ensure our homes are safe, decent and sustainable. It is imperative that we find new sources of funding and partners that are committed to ESG outcomes, to ensure that we can continue to build the new homes that are so desperately needed, while also investing in our existing properties.

“The shortage of affordable homes is still real, significant and urgent and we owe it to our future customers to continue to build new homes, despite competing demands on our money.

“In M&G we have chosen a partner who shares our values and social purpose. M&G is focused on environmental sustainability and social value, and we believe that together we will drive innovation in product and customer service, helping us to keep improving our shared ownership offer.”