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NAPF and PPF name PIPs founding investors

18 October 2012

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The NAPF and PFF today announced the first schemes which have come on board as founding investors in the Pensions Infrastructure Platform (PIP).

Among the first pension schemes who have made a soft investment commitment to the fund are the BAE Systems Pension Funds, BT Pension Scheme, Pension Protection Fund, The Railways Pension Scheme, Strathclyde Pension Fund, and West Midlands Pension Fund.

A further two pension funds are actively considering becoming founding investors and are currently discussing the commitment with their investment committee. In a statement to the press, Joanne Segar, chief executive of the NAPF and Alan Rubenstein, chief executive of the PPF, also said another three schemes were still undecided about their involvement but both expected more schemes to join the platform in the coming six months.

With the commitment of the schemes the PIP has secured the critical mass needed to move to the next stage of development and is planning to launch in the first half of 2013.

David Adam, chief Investment officer at BAE Systems Pension Funds, said: "BAE Systems is pleased to become a founding investor of the Pensions Infrastructure Platform. We believe the PIP is an important development that will help schemes like ours gain access to infrastructure on terms that are aligned to the long-term interests of pension funds."

Also welcoming the PIP is Chris Hitchen, chairman of RPMI Railpen, who said: "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."

With the founding investors on board, the NAPF and PPF will now start further development of the PIP, which includes FSA registration, drafting investment criteria and manager selection. The two organisations do not exclude the possibility of an internal investment manager.

With a target size of £2bn the PIP is expected to invest in core infrastructure, and in projects free of construction risk and on an availability basis so as to avoid excessive GDP risk. It will feature low leverage – no more than 50% per project, and across the PIP as a whole. Fees will be low – ca 50bpts. Investments will be inflation-linked and the fund is seeking long-term cash returns of RPI +2 to 5%.

Though the exact type of infrastructure assets will not be known until managers have been selected, schemes have been able to view a list of potential asset types in order to secure their committment to the platform. Projects such as schools and hospitals have been welcomed by the schemes and mentioned by the PPF and NAPF as potential future investment projects.

The PIP is being developed "for pension funds by pension funds," comments the NAPF. "Together with pension funds we sat down and worked out the core features, such as target returns, low risk and the construction risk," said Segars. "When we talk to funds and tell them about these core features they come back to us saying this is what we have been looking for."

Rubenstein said: "Since we started this project, we have found that people have been genuinely supportive of the idea that pension funds and infrastructure investment fit well together. "We are looking forward to the day the PPF can contribute to the PIP as an investor, in the best interests of our members and levy payers."

 

First published 18.10.2012
azeevalkink@wilmington.co.uk