Exclusive: PIP downsizes £1bn multi-strategy fund

The UK platform’s first vehicle for direct infrastructure investment has had its target reduced by £400m following a change in strategy by some pension funds.

The UK-based Pensions Infrastructure Platform has reduced the target of its landmark Multi-Strategy Infrastructure Fund from £1 billion ($1.2 billion; €1.2 billion) to £600 million.

The move came following a shift in the strategies of major pension funds in general becoming more selective as to the projects they want to invest in, with a focus on those with a higher risk-return profile than the assets currently targeted by the fund, PIP told Infrastructure Investor. As a result, a single, co-mingled vehicle was no longer sufficient to meet the needs of all the investors, it added.

The platform said it will respond to these needs by offering pooled fund, co-investment and segregated account investment options instead as it attempts to reach the total £2 billion assets under management target set upon its formation in 2012.

“As a result of these developments we now anticipate the pooled vehicle being just one element of the [PIP platform] rather than all of it,” PIP chief executive Mike Weston told Infrastructure Investor. PIP added that the MSIF has no fixed final close date but that it is likely to reach the milestone in spring 2018.

The MSIF was launched in March 2016 and reached a £125 million first close in April, marking PIP’s entry into direct investment after previous funds managed by Dalmore Capital and Aviva Investors targeting PPP and small-scale solar that reached £500 million and £131 million closes respectively. PIP also plugged £370 million into another fund managed by Dalmore for its investment in the £4.2 billion Thames Tideway Tunnel.

PIP charges maximum fees of 50 basis points for the MSIF, targeting low-risk, long-term returns of RPI plus 2 to 5 percent. Investments by the fund so far have comprised a £27.5 million loan to a 6.71MW rooftop solar portfolio, a £36 million equity injection into 31 individual wind turbines, £20.3 million to refinance a 7.15MW rooftop solar portfolio and most recently, the acquisition of six solar farms with a combined capacity of 30MW.

Following its launch last year, PIP said the MSIF would be making between 10 and 20 investments spanning the transport, social, energy, telecoms, waste and accommodation infrastructure sectors. Typical investments would range between £25 million and £75 million across a five-year investment period, the platform said. The fund would provide investors with a degree of alignment and transparency “not available elsewhere in the market today”, it added.

PIP’s members include British Airways Pensions, Lloyds TSB pension schemes, the Pension Protection Fund, Railpen, Strathclyde Pension Fund and the West Midlands Pension Fund.