UK schemes sign up to Pensions Infrastructure Platform
UK - Four more UK pension funds have become founding investors in the joint Pensions Infrastructure Platform (PIP) being developed by the Pension Protection Fund (PPF) and the National Association of Pension Funds (NAPF).
PPF chief executive Alan Rubenstein and his NAPF counterpart Joanne Segars announced at the organisation's annual conference in Liverpool that the pension funds for defence and aerospace company BAE and telecoms provider BT had agreed to fund start-up costs for the platform, as well as commit £100m (€123m) each in seed capital.
Additionally, the Railways Pension Scheme and the West Midlands local authority fund were named as joining previously confirmed founding investor Strathclyde Pension Fund and the PPF, which agreed to develop the PIP after signing a memorandum of understanding with the UK Treasury in November.
David Adam, CIO at the BAE Systems pension fund, said the PIP was an "important development", enabling access to infrastructure in terms there were aligned with the scheme's long-term interests.
Chris Hitchen, chairman at the Railway Pension Scheme's asset manager RPMI, added: "It is an important step in creating the right structure for all UK pension schemes to be able to invest in infrastructure, which should represent a highly appropriate asset in meeting our pension liabilities."
As a result of the new commitments, six of the targeted 10 founding investors have now been confirmed.
Rubenstein said "a couple" of funds had seen the infrastructure platform put before their investment committees, but that they were currently unable to name them.
The hope is that the 10 founding investors will provide £1bn in seed capital, with an additional £1bn from pension funds committing after the launch, allowing for a total leveraged size of £4bn.
Rubenstein and Segars were unable to confirm the type of assets the platform would target, but Rubenstein said they would "certainly" be interested in school and hospital projects.
Asked about how the PIP would pursue investments free of construction risk, Rubenstein said there were a number of avenues available, including the £40bn UK Guarantees scheme unveiled by Treasury over the summer, and the forward sale approach often employed in France.
Rubenstein also addressed concerns that the 50 -basis-point management fee was unachievable.
"We have had discussions with a number of internal and external managers, and we believe it is possible to do it for around that," he said.
"It may not be precisely 50bps, but it certainly won't be 2-in-20 or 1-in-10."
He added that a range of 50-70bps possible, but that 50bps "remains the aim".
Segars, meanwhile, expressed concerns that legislation governing investment guidelines for the country's local government pension scheme sector was preventing some of the funds from committing to the PIP.
She said the "small matter" of local authority investment regulations prevented the funds from investing more than 15% of scheme assets in limited partnerships - a ceiling many of the funds are already approaching.
"One of the things we've been doing is working with [the Department for Communities and Local Government] to see if we can do something about that limit," she said.
"Part of the problem for local authorities - or part of the barriers for local authorities - has been these investment regulations. I very much hope we are close to seeing big change."
Rubenstein also addressed the potential delay in the platform's launch, with a January 2013 date no longer envisaged.
He said the initial launch date had always been "very optimistic", but added that a tough target was needed for progress to be made.