The London Pensions Fund Authority (LPFA), BT Pension Scheme (BTPS) and BAe Systems have all decided not to pursue their original interest in investing in UK infrastructure through the Pensions Infrastructure Platform (PIP).
Established by the National Association of Pension Funds (NAPF) and the Pension Protection Fund, the PIP was marketed as a non-profit vehicle “by pension funds and for pension funds”, which aimed to raise £2 billion (€2.4 billion; $3.3 billion).
With its ten initial signatories pledging “soft commitments” of £100 million each, it was believed that the platform had reached £1 billion in total capital. However, the withdrawal of three founding investors brings this figure down to £700 million.
In a statement, the LPFA said: “As the PIP moved towards awarding its first mandate, it became clear that the pricing and risk-return profile targeted by the PIP, as well as other aspects of the PIP cost structure, differ from those now required by the LPFA.”
A spokesperson for the LPFA, which became the tenth signatory to PIP in February last year, declined to elaborate on its concerns over pricing and risk-return when approached by Infrastructure Investor.
A separate statement from an NAPF spokesperson said: “We’ve always said that founding investors would only come into the fund if the design of the PIP reflected their needs. The majority of founding investors remain committed to the PIP and we don’t expect that to change. LPFA, BAe and BTPS have decided that the PIP is not for them, but we’re grateful for their input.”
PIP says it targets low fees of around 50 basis points, the low-risk end of the infrastructure investment spectrum and long-term cash returns of Retail Price Index (RPI) plus two to five percent.
Earlier this week, it was announced that the first fund to arise from the PIP – the PPP Equity PIP Limited Partnership – had received commitments of £260 million. The fund, which will target UK public-private partnerships and has a hard cap of £500 million, will be managed by London-based fund manager Dalmore Capital.
In a press release, the NAPF named British Airways Pensions, Pension Protection Fund, Railways Pension Scheme, Strathclyde Pension Fund and West Midlands Pension Fund as backers of the PIP PPP Equity Fund.
Lloyds TSB and one other anonymous fund are also founding investors in the PIP.