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IPE special report May 2018

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UK Pensions Infrastructure Platform adds solar as fund launch nears

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The UK’s Pensions Infrastructure Platform (PIP) has added a solar investment fund to its portfolio as it builds up internal capacity and awaits regulatory approval to become a fully fledged asset manager.

The PIP was set up, backed by the National Association of Pension Funds (NAPF), in 2011 as a method of channelling pension fund investment into UK infrastructure, avoiding the market fee structure and general partner/limited partner set-ups.

After making its first allocations in public/private partnership (PPP) infrastructure equity assets in 2014, the PIP is set to finalise its approval from the Financial Conduct Authority (FCA) and begin managing assets in-house.

Mike Weston, chief executive at the PIP, said gaining authorisation would be the third and final key stage in the fund’s long-term plan to become a ‘one-stop shop’ for pension fund infrastructure investment.

“It is important we do everything we have to do in describing this novel concept [to the FCA],” he said.

“We should benefit by the fact we are investing in very simple products – real tangible assets, not complex structured derivative instruments.

“We might lose in consideration by [the PIP’s] being a new, different structure with founding investor pension schemes backing the concept.”

For the FCA authorisation, Weston said it was essential to have appropriate people within the company, adding that it was currently recruiting for an investment director with direct dealing experience in infrastructure assets.

There are also plans to add a head of risk function and investment analytical support for the team.

Weston said headcount would grow as assets under management did.

The PIP is also set to launch a multi-strategy infrastructure investment fund, which has been already developed by the organisation and will be launched once FCA authorisation is given.

Over the long term, Weston said he expected the PIP to hold a mixture direct and indirect investments – using the two external funds as a starting point.

In addition to the PPP Equity Fund, managed by Dalmore Capital, the PIP has arranged to host Aviva Investors’ Solar PV fund, which invests in solar panels and power generation.

The Dalmore fund has already invested £255m (€209m) of PIP founding investor capital in 42 assets and increased the cap of the fund to £600m, which will close in September this year.

Dalmore said it expected to increase its fund AUM from £350m currently to £500m by April, while the solar fund has yet to be launched but has a cap of £250m.

Weston also said the PIP would like to grow and become more able to invest in large-scale UK infrastructure projects and that discussions had taken place over a bid for the Thames Tideway Tunnel, a £4.8bn project to update London’s ageing sewer network.

The PIP originally set its target size of £2bn based on £200m commitments from its original 10 founding members.

Weston admitted there was a long way to go to raise the capital.

However, he said the “controlled expansion” of the platform would allow for this to happen.

He also said the PIP was working on the challenge of being able to accept commitments of any size from UK pension funds – and that assets would match those required by insurance companies so pension schemes could still approach buyouts.

Only five of the 10 founding investors have committed capital to the Dalmore PPP Equity fund, as three funds left the platform altogether, and two refrained from infrastructure equity.

Read Taha Lokhandwala’s analysis on how the PIP and similar projects in Europe are working for pension funds

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