UK – Strathclyde Pension Fund (SPF) has taken a further step towards infrastructure investing, by approving a revised framework for investment in the asset class. The asset class is set to include the funding of social and affordable housing, as well as economic development projects.
The latest move was made by the SPF Committee at a meeting on 4 March, according to minutes just published.
In a report prepared for the UK's largest local authority fund, consultancy PwC noted the advantages parts of the residential sector could offer – such as the regulated nature of housing associations and the index-linked cashflows.
Investment in the asset class will be made via the Pensions Infrastructure Platform (PIP), in which SPF is a founder investor, along with nine other of the UK’s largest pension funds. These include BT Pension Scheme, British Airways Pension Scheme, the Pension Protection Fund, London Pension Fund Authority and Lloyds TSB Group Pension Scheme.
SPF has already agreed in principle to invest £100m in PIP. This represents 0.8% of its portfolio, worth £12.4bn as at 31 January 2013, which represents its highest-ever value.
Last year, SPF paid £100,000 to help fund start-up costs for PIP.
A corporate administration structure has now been set up, with PricewaterhousCoopers (PwC) handling the selection process for a manager to run the platform.
Investment criteria, asset preferences and fee structures are still being agreed, with the aim of launching by the end of June this year.
The asset class forms part of SPF's New Opportunities Portfolio, set up in 2009, which now contains seven individual investments. An implementation framework for the portfolio was created by PwC and completed in January this year. It is this framework which SPF has now approved.
SPF achieved a return of 3.0% for the quarter to 31 December 2012, compared with 3.1% for the average UK pension fund over the same period, as measured by the WM All Funds Universe.
As at the same date, SPF's indicative total funding level stood at 81.7%.