UK schemes abandon infrastructure platform over costs, returns [updated]
Three major UK pension funds, which have more than £65bn (€79bn) in investible assets, have pulled out of the Pensions Infrastructure Platform (PIP), as the initiative moves forward with initial investments.
The PIP, created as a joint venture between the National Association of Pension Funds (NAPF) and the Pension Protection Fund (PPF), was designed to allow UK funds to invest in low-risk infrastructure in a collective manner.
However, the PIP, which has been beset by delays, has taken another reputational hit just as it was moving forward with its first investment.
The BT and BAE Systems private sector funds and the London Pension Fund Authority (LPFA) were all previously listed as founding investors of the platform, but the NAPF has since confirmed they are no longer so.
The LPFA said the PIP had begun to look less attractive as it moved forward, despite the scheme becoming the tenth investor in the platform.
A spokesman told IPE: “As the PIP moved towards awarding its first mandate, it became clear the pricing and risk/return profile targeted by the PIP, as well as other aspects of the PIP cost structure, differed from those now required by the LPFA.”
The BT Pension Scheme (BTPS) also confirmed its withdrawal from the platform.
A spokesperson said that, with more than £1.2bn from the £47bn fund invested in infrastructure, it preferred its own investment strategy.
“While we are pleased to have been involved in the development of the PIP,” the scheme said, “our ongoing direct investment programme remains the most appropriate solution for the BTPS.”
BAE Systems echoed the LPFA’s views, confirming it had ceased investment in the PIP.
“As the PIP moved towards a manager appointment, it became clear that the risk/return profile of the target investments no longer matched the pension fund’s requirement,” the fund said.
The NAPF and PPF said it would not comment any further on the decision of the schemes to leave the platform.
This leaves as the remaining investors in the PIP the public sector Strathclyde and West Midlands pension funds, the former nationalised Railways Pension Scheme, the British Airways Pension Scheme, the Lloyds TSB fund, the PPF and one other anonymous fund.
As the scheme moves forward with its investment project, six of the seven remaining founding investors, with the exception of Lloyds TSB, have collectively committed £260m to a fund investing in public and private partnerships (PPPs).
Investment will be made by the PPP Equity PIP Limited Partnership, a fund created by Dalmore Capital, the manager selected by the NAPF to run its first investments.
The fund has received £260m in investment from the six contributors, and its size could increase to £500m.
Allocations to PPPs, which generally invest in public services, will begin later this year.
The NAPF said it would commence further fundraising from other pension schemes, with additional funds forming part of the PIP in the near future.
The PIP had originally set a target size of £2bn.
However, after delays in the setting up of the structure, and the appointment of fund managers, it is now severely delayed for its first investment, originally set for the summer of 2013.
On the announcement of its first fund creation, NAPF chief executive Joanne Segars said: “This is fantastic news for all UK pension schemes that have an interest in infrastructure investment, which will be targeted at meeting the PIP’s original aim to make infrastructure work for pension funds.”