UK pension invests £35m in IFM

The Leicestershire County Council Pension fund has chosen Industry Funds Management for one of its first infrastructure allocations, as UK pension appetite for infrastructure continues to grow.

Australia’s Industry Funds Management (IFM), a fund manager owned by 32 Australian pension funds, has received one of Leicestershire County Council Pension fund’s first infrastructure allocations, IFM announced today in a statement.

The £35 million (€42 million; $55 million) mandate – which IFM is calling “one of the largest to be offered by a UK local authority” over the past year – will go toward IFM’s open-ended infrastructure fund, which targets core infrastructure assets across Europe, North America and Australia.  Past IFM purchases include Anglian Water, in the UK, the Colonial Pipeline, in the US, and German electricity transmission network 50Hertz Transmission, previously owned by Vattenfall.

“This mandate is a significant milestone for IFM as the benefits of infrastructure investing – and demand for infrastructure exposure – by pension funds in the UK continues to grow,” Christian Seymour, IFM’s head of infrastructure for Europe, commented in a statement.

In its annual report for the financial year 2010/2011, the Leicestershire County Council Pension fund explained the rationale behind its move to infrastructure.

“The most natural asset for protecting the fund against its inflation risk is UK government index-linked bonds, but these are very expensive as there are a number of price-insensitive buyers and a lack of supply. As a result, the investment subcommittee has agreed to an initial three-prong investment strategy to obtain some protection against inflation [including] investment in infrastructure.” 

Last year saw a number of local UK pension funds make debut infrastructure allocations. These included the Northumberland County Council Pension fund and the Shropshire Pension fund – both of which respectively invested £20 million and £30 million in Global Infrastructure Partners’ second infrastructure fund, which is targeting a final close of $6 billion.

Australian fund manager AMP Capital also managed to captivate local UK pension funds for both its equity and debt offerings. In August 2011, the Merseyside Pension fund invested £20 million in its European infrastructure fund, known as the Strategic Infrastructure Trust of Europe. And last December, the East Riding of Yorkshire Council Pension fund helped propel AMP Capital’s subordinated debt fund to a €284 million third close.