UK - Pension schemes in the UK should consider local infrastructure investments as a means of matching liabilities and lowering the currency risk associated with investments abroad, according to Hermes GPE.
Following the government's unveiling of plans to attract £20bn (€23.3bn) of pension fund capital for infrastructure projects, Peter Hofbauer, head of infrastructure at Hermes GPE, told IPE there could be interest from younger UK pension schemes across the country, but he warned that they would first have to adopt the right process.
"Some infrastructure assets can provide the right investment characteristics for institutional investors such as pension funds - particularly on the liability side, as they provide long duration, low volatility, a real rate of return and are often inflation-linked," Hofbauer said.
"Contrary to larger schemes that have been able to make investments in infrastructure for quite a while - either directly or indirectly - and have now the right human capital and skills, younger pension funds still need to go over the 'access' concerns.
"But once we manage to address those concerns, the investment characteristics will be something a large number of institutions will be comfortable with."
Hermes GPE, which signed the Memorandum of Understanding with the government last week to promote investment in UK infrastructure, is now set to engage into a dialogue with pension schemes around the country.
Hofbauer said local pension schemes would do well to stick with UK investments - as opposed to investing in infrastructure abroad - in order to limit currency risk within their portfolios.
He added: "There is a compelling logic to have local institutions investing in projects across the UK - particularly in the current world, where we are moving more and more toward localisation due to the risk of investing in different currencies and therefore the cost of implementing hedging strategies."
The government hopes to unlock £20bn in total and has targeted mainly local pension funds to invest in greenfield projects.
However, concerns have been raised over the feasibility of the programme for UK pension schemes.
Merseyside local authority pension scheme has said that, until the details of the vehicle are made public, it would be impossible to commit to investing in it.