Exclusive: Swiss pensions aim for CHF1bn infra fund

Nine institutions have already committed nearly CHF300m to the platform, which is in the process of choosing investment advisers.

A grouping of Swiss pensions is about to make its first steps in infrastructure, Infrastructure Investor has learnt.

Nine of the country’s institutions have committed to IST 3 Infrastructure Global, an evergreen infrastructure vehicle set up by the not-for-profit IST Investment Foundation (IST). Launched last year, the fund held its first closing at the end of June on CHF298 million (€245 million; $332 million).

IST now hopes to top up the pool with between CHF100 million and CHF200 million through a second closing by March 2015, followed by a third close by the end of June next year. Over time, the foundation hopes to grow the platform to up to CHF1 billion, Stephan Schmidweber, a deputy director at IST, told Infrastructure Investor.

The fund’s initial investors include pensions for Migros and Manor, two Swiss retailers, as well as funds for pharmaceuticals group Roche, for the Swiss energy sector, and for the canton of Luzerne. All except Roche are also represented on the vehicle’s board of trustees.

IST 3 Infrastructure Global will follow three distinct investment sub-strategies, comprising a non-discretionary, CHF120 million mandate given to an infrastructure secondaries manager; a CHF160 million mandate awarded to a primary investment adviser; and, in time, direct investments in mid-size assets across the OECD.

The fund’s focus will primarily be on brownfield, cash-yielding assets, with the objective to deliver a 4 to 6 percent current yield and an IRR of between 7.5 and 8.5 percent. It will target sectors including transport, energy, communication and social infrastructure and aim for 50 percent of its investment revenues to be directly or indirectly linked to inflation.

IST is in the process of choosing investment managers, which Schmidweber said would “help us source deals” with the “final decision” remaining with IST’s investment committee rather than the adviser.

It is close to reaching a decision on the manager for its secondaries strategy, which it sought via a Request For Proposal (RFP) on search platform IPE Quest and which could be based in Australia, Europe or the US. It is at an earlier stage of finding an adviser for its primary strategy, with suitable candidates most likely to be based in Europe.

Schmidweber said the fund would first start deploying money in secondaries, so as to put capital to work quite quickly across different sectors and geographies. He expected the first investment to be made in late September or October of this year.

The fund will then begin investing in primary assets with a focus on Europe, initially through funds and then also directly. Up to 30 percent of the capital invested directly will be earmarked for assets based in Switzerland. It may also consider investing in other OECD markets, such as Australia or the US, after a learning period that could last between five and seven years.

Founded in 1967, IST is the oldest investment foundation in Switzerland. It manages about CHF6 billion on behalf of around 500 tax-exempt, Swiss-domiciled public and private pensions.