NY Common carves out space for infrastructure

The pension has built an allocation of up to 5% within its alternatives allocation for investments in infrastructure assets and real assets like gold and timber.

The $126 billion New York State Common Retirement Fund for the first time has carved out a niche in its massive portfolio for infrastructure investments.

The pension has created a space within its alternatives allocation to house investments in infrastructure, real assets like timber and gold, and commitments to the US government’s bad bank programme, called the Public-Private Investment Programme.

The allocation for infrastructure and other strategies will take up to 5 percent of the overall portfolio and sit within the alternatives allocation, which has a range of up to 25 percent and has a current allocation of 20 percent.

The pension has not invested in infrastructure but is interested in the asset class, a spokesperson for New York Commons told Infrastructure Investor. The carve-out does not mean that New York Common is actively searching for an infrastructure manager, but now has the ability, if the opportunity arises, to make an investment in that asset class, the pension spokesperson said.

“This creates an opportunity for discussion,” the spokesperson said. “We’ve got an interest in [infrastructure] and we’ve created a space in the portfolio.”

Pensions have become increasingly more interested in infrastructure investing, which compared to private equity is a young asset class. European pensions have been expressing interest in infrastructure, according to one source who works for a gatekeeper that advises European pensions. The source wished to remain anonymous.

“Historically, some pensions have actually invested in infrastructure through private equity investments, like airport investments you find in private equity funds,” the source said. “Historically infrastructure has always been a part of either a real estate mandate or a private equity mandate. In recent years, clients have been giving it its distinct allocation. It has a distinct line in their asset allocation.”

The infrastructure space has exploded with new managers and funds without much of a track record, the source said. “It’s such a young asset class and because there’s so much interest, there’s so many new teams that are raising funds but can’t really show that they not only invested successfully but also exited successfully,” the source said.

Other pensions that have recently created an allocation space for infrastructure include the London Pension Fund Authority, which in October said it would like to invest up to 7 percent of its assets in private equity and infrastructure, the California State Teachers’ Retirement System, which in July said it would allocate 5 percent of its assets to inflation-protected assets like infrastructure, and the Alaska Permanent Fund Corporation, which in May created a new real assets category including real estate, infrastructure and Treasury inflation-protected securities.