NAPF, PPF outline details of new UK infrastructure fund
UK - The National Association of Pension Funds (NAPF) and Pension Protection Fund (PPF) have shed further light on a proposed infrastructure platform under development, saying the fund would look for ways to avoid exposing investors to construction risk, while allowing them to retain ownership following a project's completion.
PPF chief executive Alan Rubenstein - outlining how far discussions had come since a memorandum of understanding with the UK Treasasury was signed last year - said plans were for 10-12 pension funds to commit £1bn (€1.2bn) in capital, with a further £1bn attracted from other schemes following the fund launch - provisionally planned for January next year.
While the £2bn was far below the £20bn estimates released by the Treasury last year, Rubenstein said the lower figure came about because the parties involved were "practical people", with NAPF chief executive Joanne Segars saying the initial figure was a "long-term aspiration".
Asked whether the Pension Infrastructure Platform (PIP) would rely solely on equity or also consider infrastructure debt, Rubenstein said: "It will look across the whole capital structure, so it may use leverage. We've indicated thus far that we think, in terms of leveraging it up, it would be 50/50 equity and debt per project."
Rubenstein also said that, in an effort to address investors' concerns about cost overruns, the platform would look for ways to avoid construction risk.
"We are aware of the issue, and we will be structuring things so that pension funds are not taking construction risk, which they are frankly not well placed to understand or manage," he said.
Segars declined to comment on what type of infrastructure the fund would initially target, saying this was for the founding investors to decide.
Rubenstein said assets outside the UK would "potentially" be considered, but that final decisions would be reached once fund managers had been appointed.
Asked why no similar fund had been developed by the NAPF before now, Segars said it was a "good time" for such proposals and urged the industry to look forward rather than back - repeatedly stressing that PIP would be open to smaller UK schemes.
Rubenstein, however, said a pension fund's location would not impact willingness to accept capital, telling IPE after the presentation that, while it was "right" to focus the design around UK funds, this would not limit other investors.
"Provided anyone else would want to subscribe and knew what they were getting - and what they will get is something that is designed to produce that long-term, low-risk, inflation-linked revenue stream - provided they want that, I can't see any reason why you would prevent them from participating if they wanted," he said.
Asked about the risk of investing in Scottish infrastructure with an independence referendum proposed for late 2014, Rubenstein said there were many projects in the National Infrastructure Plan - which covered all of the UK - that would be of interest.
"We will look at infrastructure predominantly in the UK, and we will look to invest with no construction risk," he said.
"Apart from that, it will be down to the managers of the fund to decide what's a good opportunity and what's not."