Pension consultant launches search for infrastructure managers(4)

The Pension Consulting Alliance is looking for professionals who can design and manage a pooled investment vehicle for public pension plans, which could reach up to $2bn in size. The firm will place particular importance on ‘creative fee structures’ and alignment of interest with labour concerns.

The Pension Consulting Alliance (PCA), a pension investment advisor to some of the US’ largest pension plans, has launched a search for an infrastructure investment manager to design and manage a specialised infrastructure investment fund for pensions that could reach $2 billion in size.

PCA, whose clients include the $193.3 billion CalPERS and $123.8 billion CalSTRS pension plans, has launched a request for information (RFI) to find an investment advisor capable of ‘implementing a tailored infrastructure portfolio on behalf of public pension funds’.

The RFI did not name which plans it was acting on behalf of or how many, but it noted that a number of public pensions have expressed interest in pooling their resources to invest in infrastructure assets.

As previously reported by InfrastructureInvestor, the creation of such a multi-pension pooled investement vehicle was one of the items discussed at Stanford University in June during an exclusive gathering of pension and other institutional investors representing nearly $1 trillion of assets.

The structure of any pooled investment vehicle has yet to be determined, but PCA said that it would include an oversight  committee composed of representatives from each pension and would provide each participant an opportunity to opt out of investments proposed by the manager.

The vehicle would range between $1 billion to $2 billion in size and is intended be tailored to the characteristics of infrastructure investments. Such characteristics include stable and predictable cashflows that allow many pension plans to better match their assets and liabilities than other, more volatile asset classes like public equities.

PCA said that “particular emphasis will be placed upon creative fee structures” and alignment of interest with labour concerns.

The vehicle is expected to have a global investment mandate and will be able to make direct and indirect investments in infrastructure assets as well as publicly-listed infrastructure securities. Some pension participants will also require the ability to co-invest in assets outside the pooled investment vehicle, PCA said.

First-time funds, which comprise 55 of the 70 infrastructure funds currently in the market, according to placement agent Probitas Partners, are encouraged to participate in the RFI process, PCA added.

A person close to PCA said the RFI is an attempt “to see what managers are out there, what they’re doing, what they’re expecting and to have a picture of what is available in the market”. PCA will provide that information to its clients, the person said, and they will decide whether to pursue requests for proposals to hire any managers. There is no guarantee that any responder to the RFI will be hired by any of PCA’s clients, according to the RFI.

Responses to the RFI are due by 25 September at 5pm.

The RFI is a first for PCA, which has conducted similar searches in the realm of private equity and real estate, but, until now, not infrastructure.

PCA represents 24 clients with total assets of $674 billion, according to a press release.

Besides the Californian pensions, CalPERS and CalSTRS, other PCA clients include the State of Oregon Investment Council, the Los Angeles City Employees' Retirement System, Los Angeles Fire and Police Pensions and the New York City Employees’ Retirement System, among others.