Suffolk pension commits $46m to JPMorgan in hunt for faster drawdowns

The UK pension has been struggling with its infra allocation, investing last year in Infracapital to make up for a slower Partners Group drawdown, but finding itself in the same situation again.

The UK’s Suffolk County Council Pension Fund has confirmed a £35 million ($44.5 million; €39.1 million) investment in JPMorgan’s Infrastructure Investments Fund in its latest bid to maintain its desired infrastructure exposure.

The scheme recommended the investment on the basis that the open-ended fund “offers a more flexible option in terms of liquidity and speed of deployment” than its current infrastructure exposure.

The move comes after it emerged over several meetings that the drawdown method employed by Infracapital’s £1.25 billion greenfield fund – into which Suffolk invested £60 million last March – would leave the pension fund short of its medium-term targets.

Infracapital’s greenfield vehicle uses equity-bridge loans to finance several of its projects, meaning up to 10 percent will be drawn down from investors this year, no more than 11 percent by the end of 2020 and a maximum of 28 percent in 2021, according to Suffolk. Projects are initially 100 percent debt financed but on completion become a 50 percent split between debt and equity. The method is commonly used for greenfield and PPP-type projects.

After meeting representatives from Infracapital earlier this year, Suffolk said this was “very much below the expected levels of cash drawdowns” and that it would seek to make decisions to fill this gap. While a follow-up meeting with Infracapital in June left the pension fund with “a clear explanation of the reasons” for the method and with understanding of its economic exposure, it still felt the need to invest with JPMorgan.

Two sources have indicated to Infrastructure Investor that other investors in Infracapital’s fund have been comfortable with the deployment method and have not raised similar issues. Suffolk declined to comment beyond the statements from its meetings.

Suffolk only invested in Infracapital Greenfield after it was encouraged by consultant Hymans Robertson last year to fill what was feared to be an underweight exposure to the asset class given the deployment of Partners Group Global Infrastructure 2012 fund, now 90 percent invested. This was somewhat contradicted by the pension fund a couple of months later. Suffolk has an infrastructure target of 5 percent, of which 2.5 percent is currently allocated, including in the first KKR fund, currently in a realisation process.

The investment in JPMorgan is the second time in recent months a UK pension has favoured the IIF for its deployment speed. Strathclyde Pension Fund invested £500 million in the vehicle in May, selecting the IIF ahead of IFM’s Global Infrastructure Fund for its faster deployment and better diversification.

The fund has 291 underlying assets across 17 platforms in 24 countries, JPMorgan told Suffolk in May, with assets under management totalling $9 billion. It targets returns of 8 to 12 percent, compared with the mid-teens target of Infracapital Greenfield.