Four of the UK’s biggest pensions have backed a direct infrastructure fund through the Pensions Infrastructure Platform (PIP) collaborative project.
It is the first mainstream product launched by the PIP and the first since it gained regulatory authorization to run money itself.
“There’s a huge opportunity in UK infrastructure at the moment.”The Pension Protection Fund, RPMI Railpen, Strathclyde Pension Fund, and West Midlands Pension Fund have contributed to the Multi-Strategy Infrastructure fund, having each contributed financially to the establishment of PIP as an asset manager.
Strathclyde, Scotland’s largest public pension, invested £50 million ($71 million) in the new strategy, according to the latest minutes of its investment committee. It has put £70 million into the PIP’s two other funds.
“Infrastructure projects are attractive for Strathclyde as long-term, low-risk investments—and our members are also positive about seeing their savings supporting jobs and communities,” said Bailie Philip Braat, chair of Strathclyde Pension Fund. “Until PIP was established, the market was really geared towards short-term investors. We have more control now, so we have access to opportunities that are tailored to the specific needs of a pension fund.”
As well as the quartet of large investors—which between them manage more than £70 billion—the PIP is designed to give smaller pension funds access to infrastructure, with a minimum investment of £1 million. Fees are capped at roughly 50 basis points.
The fund will offer co-investment terms to larger investors that “we believe [are] not available elsewhere in the market today,” the PIP said in a statement. Pooled investors will have a choice of two sub-funds targeting an internal rate of return of either 0% to 2% above inflation, or 2% to 5% above inflation.
Investments will focus on transportation, renewable energy, utilities, communications, housing, and social infrastructure, the PIP’s statement said.
“There’s a huge opportunity in UK infrastructure at the moment,” said Geik Drever, strategic director of pensions at the West Midlands Pension Fund. “We helped establish PIP because we believe there’s room in the market for a transparent platform where pension funds can invest together at scale to make the most of this opportunity. The PIP Multi-Strategy Infrastructure Fund opens the door to this opportunity for pension funds of all sizes.”
The PIP has had a troubled start since its foundation in 2011, with several initial backers pulling out. Prior to today’s announcement it had launched two niche funds investing in solar energy and public-private partnership contracts, which raised £1 billion from UK asset owners.
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