Infrastructure proved to be last year’s “star performer” for the London Pensions Fund Authority (LPFA), according to the institution’s latest annual report.
The £4.9 billion (€6.2 billion; $7.8 billion) pension achieved returns of 20 percent on its infrastructure holdings in the 12 months to end March 2014, compared with an overall fund performance of 6.1 percent. The solid results were largely due to the “successful sale” of a portfolio of assets held since 2004 by one of LPFA’s managers. The fund declined to provide further details on the deal.
LPFA’s infrastructure portfolio was valued at £170 million as at 31 March 2014, representing an asset allocation of 3.5 percent. Although it doesn’t disclose a specific target for each alternative asset class, its aim is to have about 30 percent of its capital invested in illiquid assets by 2016.
Funds currently backed by LPFA, London’s largest local government pension, are focused on sectors including renewable energy, public-private partnerships (PPP) and greenfield core infrastructure in Europe and North America. They comprise vehicles managed by Impax Asset Management, Meridiam Infrastructure, Zouk Capital, BNP Paribas Clean Energy Partners, 3i Infrastructure, InfraRed Capital Partners and Foresight Group.
The latest managers it invested with are the UK’s Semperian PPP Investment Partners and Houston, Texas-based the Energy and Minerals Group.
The pension is also gearing up its capabilities for deploying its capital outside co-mingled funds. Last July, LPFA chief executive Susan Martin told Infrastructure Investor that the institution was looking to invest in real assets via consortiums and co-investment platforms.
“It doesn’t matter whether you are a public sector investor or a private sector pension fund. What you really need is the scale and size to invest in infrastructure directly with other pension funds.”
Martin became chief executive of LPFA in January this year, shortly before the institution pulled out of the Pension Infrastructure Platform (PIP), an initiative launched by the National Association of Pension Funds (NAPF) that aims to collect up to £2 billion from UK institutions.
The fund has an 8 percent minimum return for its infrastructure holdings but has been looking at assets capable of delivering up to 15 percent. It is in the process of enlarging its infrastructure team and is also thinking of bolstering its direct investment capabilities by pooling resources with like-minded local pensions.