KPERS bets on open-ended funds with $100m for IFM, JPMorgan

The $18.5bn public pension fund recently approved commitments of up to $50 million each to IFM Global Infrastructure Fund and to JPMorgan Infrastructure Investments Fund.

The Kansas Public Employees Retirement System has increased its exposure to the infrastructure asset class, approving follow-on commitments of $50 million each to two open-ended vehicles.

The recent allocations, approved during the fund’s latest board meeting in late March, are in addition to the $100 million KPERS had previously committed to Australia’s IFM Global Infrastructure Fund and the same amount invested with the JPMorgan Infrastructure Investments Fund, a spokeswoman told Infrastructure Investor.

Earlier this year, the Australian fund manager said it would be looking to raise an additional $3 billion for its open-ended vehicle, which had around $16 billion in funds under management, according to pension fund documents released in the second half of last year. It had designated the period from January 2018 to the end of March as a priority period for the fund’s existing investors.

The JPMorgan Infrastructure Investments Fund, is another open-ended vehicle, which as at March 2017, was valued at $6.1 billion, according to documents from the City of Fresno Employees Retirement System. IIF is targeting 8 percent to 12 percent returns and is generating a 6.6 percent net IRR over one year and 6.9 percent for five years.

It was unclear whether the decision to commit additional capital to these open-ended funds indicated a shift in strategy for the pension fund. KPERS did not respond to requests for comment.

The pension fund has been investing in infrastructure since at least 2009, when it committed $50 million to the Brookfield Americas Infrastructure Fund, according to Infrastructure Investor data. Its infrastructure portfolio, as well as timber, sits within KPERS’ real return asset category, the majority of which comprises Treasury Inflation Protected Securities and Global Inflation Linked Bonds.

According to KPERS’ 2017 annual report, its real return portfolio stood at $2 billion as at 30 June, accounting for 10.8 percent of the fund’s total assets, just shy of its 11 percent target. While the pension fund did not provide figures for the size of its infrastructure portfolio, it did state that infrastructure achieved a total return of 8.8 percent for fiscal year 2017, outperforming the strategy benchmark.

“The System’s three infrastructure managers have been successful in operating their infrastructure investments,” KPERS stated in its annual report. The portfolio is well diversified with investments in Australia, the UK, and North and South America across a range of infrastructure sub-sectors.

However, equities continue to comprise the largest portion of the pension fund’s total portfolio. “This allocation reflects the System’s long-term orientation and the expectation that equities will provide attractive real returns over time,” KPERS said in the report.