My, how you’ve grown. In just under a year, the UK’s Pensions Infrastructure Platform (PIP) went from being a seemingly integral part of the government’s plan to get more pension money to finance its infrastructure plans to being a fully independent platform, modelled on Australia’s Industry Funds Management.
In the process, PIP has gained the initial backing of some of the largest names in the UK pensions industry, an important vote of confidence from the likes of the £8.9 billion (€10.9 billion; $14.4 billion) BAE Systems Pension Funds, the £36 billion BT Pension Scheme, the £6.3 billion Pension Protection Fund (PPF), the £18 billion Railways Pension Scheme, the £11 billion Strathclyde Pension Fund, and the £7.7 billion West Midlands Pension Fund.
Together, these schemes manage some £88 billion of pension money. And if previous documents from the Strathclyde Pension Fund are anything to go by, PIP may have already raised £600 million from its initial backers. The platform will officially launch in the first half of 2013 and is targeting a final close on £2 billion.
But perhaps the larger story behind the announcement is how decisively the PIP has distanced itself from the UK government’s infrastructure plans. It does this both in words – “the PIP is being developed for pension funds by pension funds. It is fully independent of the government, although it maintains a constructive relationship with HM Treasury” – but, more importantly, also in deeds.
Put simply, PIP will not invest in greenfield assets as it has made clear it wants projects “free of construction risk”. That excludes funding most of the new-build outlined in the government’s £250 billion infrastructure plan.
So while PIP may target UK assets, it will target fully operational ones. And there’s a fair chance the platform may even invest in other geographies. That’s a better business plan for the PIP’s limited partners – just not very good news for the UK government.