Major UK funds to join PIP project

Some of the UK’s largest pension funds, including the £36bn BT Pension Scheme, the £8.6bn West Midlands Pension Fund and the £18bn Railways Pension Scheme have signed up as founding investors in the Pensions Infrastructure Platform (PIP).

Other funds to come on board include the £11.3bn Strathclyde Pension Fund and the £18bn BAE Systems Pension Funds, as well as the Pension Protection Fund (PPF) which, together with the National Association of Pension Funds (NAPF), announced the initiative at the NAPF Investment Conference in March.Its launch followed Chancellor George Osborne’s call in November last year for schemes to invest in UK infrastructure projects. It is open to all sizes of pension funds and aims to meet their demand for inflation-linked, long-term investments.The support of some of the UK’s largest schemes means PIP, which aims to launch in the first half of 2013, has secured the critical mass of founding investors needed to move to the next stage, which includes the selection of a manager to run it.The initiative has a target size of £2bn and is expected to invest in core infrastructure projects free of construction risk and on an availability basis in order to avoid excessive GDP risk. It will also feature low leverage – no more than 50% per project and across the PIP as a whole.Elsewhere, fees will be low – around 50bps – and the fund is seeking long-term cash returns of RPI +2-5%. The project is fully independent of the government, although it maintains a “constructive relationship” with HM Treasury, the NAPF said.A number of other pension funds are actively considering becoming founding investors, the organisation added.BTPS Management head of strategy Frank Naylor said: “The PIP provides an excellent opportunity to invest in core UK infrastructure alongside like-minded UK pension schemes.”RPMI Railpen chairman Chris Hitchen, added: “It is an important step in creating the right structure for all UK pension schemes to be able to invest in infrastructure, which should represent a highly appropriate asset in meeting our pension liabilities.”PPF chief executive Alan Rubenstein said: “Since we started this project, we have found that people have been genuinely supportive of the idea that pension funds and infrastructure investment fit well together. We are looking forward to the day the PPF can contribute to the PIP as an investor, in the interests of our members and levy payers.”