UK's Merseyside commits to £1bn core infrastructure fund
UK - Merseyside's local government pension scheme has invested £20m (€22.8m) in a fund targeting mature-market infrastructure assets.
The investment - in AMP's target £1bn AMP Strategic Infrastructure Trust of Europe (SITE) - comes as the scheme rationalises infrastructure assets into a single portfolio.
Merseyside head of pensions Peter Wallach said the investment had been driven by the appeal of real assets in an inflationary environment, specifically linking of some assets directly to inflation, and poor performance from bonds.
"Overall, we're looking for a balance of assets, with some growth assets in the Far East, but a core of stable assets in a region with strong governance and closely correlated to inflation in the UK," said Wallach.
Up to now, Merseyside's infrastructure allocation has comprised ad hoc investments in Private Finance Initiative (PFI) projects within the scheme's alternatives portfolio.
This marks the first investment for a discrete infrastructure allocation that will account for 2% of the overall portfolio.
"It will grow over time, but we have no immediate plans to increase it," he added.
SITE invests primarily in privately held infrastructure companies in Western European markets.
Boe Pahari, AMP Capital head of infrastructure for Europe, described the scheme as "private equity-style management of assets, but with a long-term focus".
As part of its investment strategy, AMP hires industry specialists to sit on the boards of companies it invests in.
The Spanish petroleum pipeline firm CLH is counted amoung its investments.
"The way it works, the companies that supply the fuel own a big chunk of the company. It's in their interests to make sure it works properly," said Pahari.
"It underpins the pipeline throughout the country, including ports, airports and the military. Notwithstanding the issues we might face, including economic risks, it's a resilient asset for us."
Spain's abrupt regulatory switch over on renewables last year highlighted the risk of infrastructure investments even in mature markets.
Pahari acknowledged that infrastructure would remain "a sensitive area" across Europe.
"It's on the radar of the populous - but they're also looking for stable utilities supplies," he said.
Correction: The headline of this story initially stated that a £1bn commitment had been nade by Merseyside. This is of course the targeted fund volume, with the scheme commiting £20m.