A new platform to support pension funds investing in infrastructure projects has now secured ten funds as founding investors, and reached £1bn of investment capital.
The two new funds to join the Pensions Infrastructure Platform (PIP) announced today are the London Pension Fund Authority(LPFA) and Lloyds TSB.
Each of the ten founding investors has made a soft commitment of £100m to the PIP, subject to the development of the PIP being completed satisfactorily meaning that the project would have has £1bn of backing.
Eric Stobart, Chairman of the Investment and Funding Committee of the Lloyds TSB Group Pension Schemes, said:
"We are pleased to have become a founding investor in the PIP and look forward to working with the other founders in developing the proposition. Infrastructure, when available in appropriate structures, should be an attractive asset class to UK pension schemes and the PIP should be an important step in making infrastructure more accessible."
Edmund Truell, Chairman of the LPFA, said:
“The LPFA is committed to meeting its liabilities for the long-term benefit of pensioners, and the PIP helps achieve that. We are delighted to be able to support this initiative while at the same time being confident that our funds will enjoy attractive, risk-mitigated returns.”
Work is now underway to complete the development of the PIP and it remains on track to launch in the first half of this year. A corporate administration structure is now in place and PwC has been engaged to provide support to the PIP in the selection of a manager. Conrad Williams, Partner and lead on institutional investor investment in infrastructure at PwC said:
“We are delighted to be working with the PIP as it decides its strategy around fund management. Institutional investors are increasingly looking to invest in infrastructure and are keen to understand the merits of outsourced versus in-sourced investment.”
Speaking on behalf of the PIP, Joanne Segars, Chief Executive of the National Association of Pension Funds (NAPF), said:
“We have made excellent progress to secure £1bn in just over a year, and we are pleased to welcome two more funds on board. Infrastructure projects can be a very good match for pension fund liabilities, but so far UK pension funds have struggled to explore this asset class. This new platform will make it much easier for them to do so.”
The two latest funds join British Airways Pension Scheme, BAE Systems Pension Funds, BT Pension Scheme, Pension Protection Fund, The Railways Pension Scheme, Strathclyde Pension Fund, and West Midlands Pension Fund.
PwC will help the PIP select a manager to run the fund. Investment criteria, asset preferences and fee structures will also need to be agreed, and FSA authorisation, if needed, will be sought. Subject to these stages being completed satisfactorily, the founding investors will provide the investment capital.
The PIP is being developed for pension funds by pension funds, and it will not be run for profit. It is fully independent of the government, although it maintains a constructive relationship with HM Treasury. The ground-breaking platform, which is open to all sizes of pension funds, aims to meet schemes’ demand for inflation-linked, long-term investments.
With a target size of £2bn the PIP is expected to invest in core infrastructure, and in projects free of construction risk and on an availability basis so as to avoid excessive GDP risk. It will feature low leverage and fees will be low – circa 50bpts. Investments will be inflation-linked and the fund is seeking long-term cash returns of RPI +2% to 5%.
Notes to editors:
1. The NAPF is the leading voice of workplace pensions in the UK. We speak for 1,300 pension schemes with some 16 million members and assets of around £900 billion. NAPF members also include over 400 businesses providing essential services to the pensions sector.
Paul Platt, Head of Media and PR, NAPF, 020 7601 1717 or 07917 506 683, [email protected]
Christian Zarro, Press Officer, NAPF, 020 7601 1718 or 07825 171 446, [email protected]