Avon, Dorset choose IFM for debut infra investment

The two UK pension schemes have selected the Australian fund manager for their first infrastructure investments, committing a combined £227 million.

Avon Pension Fund and Dorset County Pension Fund have allocated £187 million (€234.1 million; $292.6 million) and £40 million respectively to IFM Investors, the Melbourne-based infrastructure fund manager announced on Monday.

The allocations represent the first each scheme is making to infrastructure, reflecting “the increasing appeal of the asset class as schemes look for sources of uncorrelated returns that can effectively match long term liabilities,” IFM said in its statement.

In addition to being Avon’s first infrastructure investment, the £187 million commitment is one of the largest to be offered by a local authority scheme and the largest IFM has received from a UK pension fund. In 2013, the City of London Corporation Pension Fund handed IFM a mandate of £45 million, and in 2012 the Leicestershire County Council Pension Fund invested £35 million, an IFM spokesperson told Infrastructure Investor in an e-mailed response.

“We decided to make a new allocation to infrastructure following a review of our investment strategy in 2013,” said Matt Betts, assistant investment manager at Avon Pension Fund, a £3.58 billion retirement scheme that serves almost 90,000 members from the former Avon area. “IFM Investor’s portfolio and open-end investment structure, that allows allocations to be made for the long-term, were very attractive to us,” he added.

Both mandates will be invested in IFM’s portfolio of core equity infrastructure assets in developed markets.

Avon and Dorset – the latter of which has over 54,000 members and £2.2 billion in assets under management – selected IFM following a collaborative procurement process in which they were advised by JLT Employee Benefits, IFM said.

According to JLT Employee Benefits, the collaborative procurement process resulted in savings for the local government pension schemes (LGPS) involved in the process while still allowing them to independently decide on their choice of fund manager.

Founded more than 20 years ago and owned by 30 major Australian pension funds, IFM’s total assets under management stood at $43.8 billion as of September 30, 2014. Of the total, $20.3 billion is invested in infrastructure equity and debt assets.

In Europe, IFM’s clients include more than 20 corporate and public pension funds and other institutional investors from Switzerland, Germany and the Netherlands, in addition to the UK. Globally, IFM received new infrastructure equity commitments from 55 institutional investors between September 2013 and September 2014, the firm said.