Seven (plus one) sign up to UK pension platform

According to a presentation from the Pension Protection Fund earlier this week, the Pensions Infrastructure Platform (PIP) has signed up seven UK pension funds as founding members with an eighth expected imminently.

PIP is a £2 billion fund designed to pool the resources of UK pension funds for investment in infrastructure. It started life following a memorandum of understanding between the UK Treasury and two pension bodies – the Pension Protection Fund and National Association of Pension Funds.

With eight members on board, PIP will have achieved its aim of having between eight and ten founding members contributing £100 million each. The fund will use leverage to a maximum of 50 percent, and will seek a target return of 2 to 5 percent above the retail price index over a 25-year period. The fund is scheduled to launch in the first quarter of next year.

The identities of the funds are not yet known, although Infrastructure Investor previously reported in June that Strathclyde Pension Fund had signed up with a £100 million commitment. Strathclyde and other founding members are paying £100,000 to help fund the scheme’s development, including the potential set-up of an in-house management team to help run the fund.

PIP originally appeared to be a politicised UK government initiative to pump UK pension money into UK infrastructure. However, what has emerged is a vehicle that will target investments across different sectors and different geographies and which is modelled on Industry Funds Management, the £22 billion Australian investment firm owned by 32 Australian pension funds. This week’s presentation made clear that PIP is not “controlled or directed by the government”.

PIP is being promoted as a way for pensions to access infrastructure while avoiding high fees, high leverage and private equity-style buying and ‘flipping’, while also avoiding the time and cost of establishing an in-house capability.