Two more of the UK’s largest pension funds have signed up to the Pension Infrastructure Platform (PIP) taking the number of founding investors to 10.
The £4.1bn London Pensions Fund Authority (LPFA) and the £18bn Lloyds TSB Group Pension Schemes have committed to join the platform, which is being set up by the National Association of Pension Funds (NAPF) and the Pension Protection Fund (PPF) to provide a low-risk opportunity for schemes to invest in the asset class.
They join the £36bn BT Pension Scheme, the British Airways Pension Scheme, the £8.6bn WestMidlands Pension Fund, the £18bn Railways Pension Scheme, the £11.3bn Strathclyde Pension Fund and the £18bn BAE Systems Pension Funds, as well as the PPF and a tenth investor who the NAPF said could not be named.
Each of the 10 founding investors has made a soft commitment of £100m to the PIP, providing a minimum of £1bn in seed capital ahead of the planned launch in the first half of this year.
Lloyds TSB Group Pension Schemes chairman of the investment and funding committee Eric Stobart 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.”
LPFA chairman Edmund Truell (pictured) added: “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.”
PIP’s launch followed Chancellor George Osborne’s call in November 2011 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.
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 50bps. Investments will be inflation-linked and the fund is seeking long-term cash returns of RPI +2% to 5%.
In addition, PwC has been appointed to provide support to the PIP in the selection of a manager to run the fund.
PwC partner and lead on institutional investor investment in infrastructure Conrad Williams 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.”
NAPF chief executive Joanne Segars 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.”
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