First close imminent for $17.5bn GIP IV

The Oregon Public Employees Retirement Fund is mulling a $400m commitment to GIP's latest flagship, in what will be its fourth investment with the manager.

The Oregon Public Employees Retirement Fund is considering investing once again with Global Infrastructure Partners, building on a relationship with the New York-based fund manager that dates to 2011.

The $78 billion public pension fund is considering a $400 million commitment to GIP IV, as it seeks to increase its infrastructure exposure to 25 percent of its alternatives portfolio, or approximately $2.3 billion of its total AUM, following recommendations from Torrey Cove Capital Partners and the Oregon Investment Council, which manages OPERF, alongside the Oregon State Treasury.

According to the documents, Fund IV – which is due to reach a first close imminently – has a target of $17.5 billion and a hard-cap of $20 billion. It has a five-year investment period and 10-year duration with up to two, one-year extensions at GIP’s discretion and two additional one-year extensions with LP consent. The vehicle is targeting a gross IRR of 15 to 20 percent.

Like its predecessor, which closed on $15.8 billion in January 2017, and to which OPERF committed $400 million, GIP IV will continue to target investments in the energy, transportation and water/waste water sectors globally. “The firm expects to make 10 to 15 equity investments and generally aims to secure a controlling stake,” OIC investment staff stated.

Despite concerns about increased competition in the infrastructure sector and the potential for style drift, OIC investment staff cited GIP’s deep experience, its track record and strong operational focus as reasons for OPERF’s “anchor commitment”.

“Staff has confidence in GIP’s financial discipline and expertise in originating, structuring, and executing infrastructure transactions,” according to meeting documents published on the Oregon State Treasury’s website. “Moreover, GIP focuses on large-scale transactions, which tend to be more complex and less competitive than other market segments.”

GIP declined to comment.

Should OPERF approve the commitment, it will be continuing its relationship with GIP that started in 2011 when it invested $150 million in GIP II, followed by a $200 million commitment in 2014 to GIP’s Capital Solutions Fund, an infrastructure debt vehicle.

According to OIC’s meeting documents, GIP I and II are currently yielding a 25.1 percent IRR, resulting from 13 exits realised to date.

GIP has also secured a $100 million commitment from the Greater Manchester Pension Fund, making it the largest amount the public pension scheme has committed to an infrastructure fund to date, including its previous commitments to GIP II and III of $48 million and $60 million, respectively.

Earlier this month, the Chicago Policemen’s Annuity and Benefits Fund approved a $25 million commitment to GIP IV as it aims to increase its infrastructure allocation to 4 percent from 0.89 percent currently.