Clwyd Pension eyes double-digit IRR via quadruple pledge

Clwyd Pension Fund has committed to four infrastructure funds as it accelerates efforts to meet its 7 percent target allocation to the asset class.

The £38 million ($49 million; €42 million) combined pledges, which come on the back of “extensive work” carried out to identify “suitable” infrastructure investments, will go towards InfraRed Infrastructure Fund V (£10 million), Partners Group Direct Infrastructure 2015 (£10 million), HarbourVest Real Assets Fund III (£10 million) and Hermes Infrastructure Fund II (£8 million).

Clwyd Pension said further due diligence was being undertaken to try to pinpoint other suitable candidates. “It is anticipated that an allocation of 7 percent to infrastructure will be achievable by 2020,” the £1.5 billion institution added.

Documents by the £856 million Hammersmith and Fulham Pension Fund show that Hermes Infrastructure Fund II has a £1 billion target and that it was expecting to hold a close at the end of June on between £150 million and £200 million, plus £140 million in co-investments. The milestone was reached over the past few weeks, a source told Infrastructure Investor, adding that the first close was of modest size.

Hermes had not responded to a request for comment on fundraising at the time of going to press.

A document by Clwyd Pension says Hermes Infrastructure Fund II targets a net IRR of 10 percent. The Hammersmith and Fulham Pension Fund is more conservative, stating that a 60/40 “standard mix” of core/value-added strategies would allow the fund to generate an IRR of between 6 percent and 8 percent.

The pension fund notes that Hermes Infrastructure Fund I, which closed on £1.16 billion – including segregated accounts – in May 2015, has generated a cash yield of 7.6 percent.

InfraRed Infrastructure Fund V, launched last year with an undisclosed target size, aims for an 11 percent to 13 percent net IRR, according to Clwyd, while Partners Group Direct Infrastructure 2015 looks to generate a net IRR between 8 percent and 12 percent. The latter has so far raised €1.3 billion out of a €1.5 billion target, according to Infrastructure Investor data.

HarbourVest Real Assets Fund III, the first real assets vehicle of Boston-based HarbourVest, is the most ambitious of the four funds in performance terms, aiming for a net IRR of 15 percent, according to Clwyd Pension. The vehicle reached its final close in April on $366 million.