Law firm Pinsent Masons and consultancy Redington are in the early stages of putting together an infrastructure debt fund to cater to demand from their UK pension clients, representatives from both firms told Infrastructure Investor.
Robin Ellison, head of strategic development for pensions at Pinsent Masons, explained the initiative was “driven by our client base wanting to invest in infrastructure, but not being content with existing structures”. He added that Pinsent Masons has probably the “biggest pension client base in Europe”.
As such, the law firm, together with Redington and their respective pension clients are delineating a debt fund structure that will possibly cater solely to UK pensions funds interested in investing in UK infrastructure.
“From a UK pension fund perspective, it makes sense for the debt fund to focus on UK infrastructure,” argued Redington associate Conrad Holmboe. But Ellison indicated the fund’s geographic remit is not yet a done deal: “There’s currently a debate going on about whether the fund should focus solely on the UK or also invest in other countries.”
Whether it ends up focusing solely on the UK or not, Ellison, a former chairman of the National Association of Pension Funds, one of engines behind the government-driven Pensions Infrastructure Platform initiative, stressed that the planned debt fund has “virtually no government involvement”.
Both men were in agreement on why the fund will focus on debt as opposed to equity. As Holmboe put it: ““One of the main reasons for choosing infrastructure debt relates to the characteristics of the asset class which can offer attractive long-term, secured and often RPI-linked cashflows.”
RPI, short for Retail Price Index, is an inflation measure published monthly by the UK’s Office for National Statistics.
Ellison and Holmboe did not wish to comment on the debt fund’s potential size, although media reports peg it at between £300 million (€379 million; $475 million) and £500 million initially.
The UK government recently announced a decade-long, £250 billion-plus roadmap of 500 infrastructure projects across sectors including road, rail, energy and broadband. The private sector is expected to pick up the tab for almost two-thirds of the investment.