A new platform to support pension funds investing in infrastructure projects has secured the critical mass of Founding Investors needed to move to the next stage of development.
A number of the UK’s largest pension funds have already agreed to become Founding Investors in the Pensions Infrastructure Platform(PIP). They include the BAE Systems Pension Funds, BT Pension Scheme, Pension Protection Fund, The Railways Pension Scheme, Strathclyde Pension Fund, and West Midlands Pension Fund. A number of other pension funds are actively considering becoming Founding Investors.
David Adam, Chief Investment Officer, BAE Systems Pension Funds, said:
“BAE Systems is pleased to become a founding investor of the Pensions Infrastructure Platform. We believe the PIP is an important development that will help schemes like ours gain access to infrastructure on terms that are aligned to the long-term interests of pension funds.”
Frank Naylor, Head of Strategy, BTPS Management, said:
“The PIP provides an excellent opportunity to invest in core UK infrastructure alongside like-minded UK pension schemes. We look forward to a widening of the opportunities for UK pension schemes to invest in infrastructure assets which are structured to provide the right characteristics”.
Chris Hitchen, Chairman, RPMI Railpen, said:
“RPMI Railpen, as the investment manager of the Railways Pension Schemes, welcomes the launch of the PIP and is pleased to be a founding member. 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.”
With these Founding Investors on board, work will now start on the detailed development of the PIP, and a key next step is the selection of a manager to run the platform. 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 investment capital. The ground-breaking platform, which is open to all sizes of pension funds, aims to meet schemes’ demand for inflation-linked, long-term investments. The aim is to launch in the first half of 2013.
The PIP is being developed for pension funds by pension funds. It is fully independent of the government, although it maintains a constructive relationship with HM Treasury.
Joanne Segars, NAPF Chief Executive, said:
“This is excellent progress and marks an important milestone in the PIP’s development. There is a lot of work still to do, but we are confident of making further progress and launching next year.
“This investment vehicle is unique. It has been designed by the pensions industry with the pension industry’s needs squarely in mind, and it will be aligned with funds’ long term interests.”
Alan Rubenstein, PPF Chief Executive, 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. Today’s announcement is a testament to the hard work the founding group have put in to make this platform a reality.
“We are looking forward to the day the PPF can contribute to the PIP as an investor, in the best interests of our members and levy payers.”
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 – no more than 50% per project, and across the PIP as a whole. Fees will be low – ca 50bpts. Investments will be inflation-linked and the fund is seeking long-term cash returns of RPI +2 to 5%.