UK’s Brent Pension Fund commits £50m to Stepstone-managed infra vehicle

Stepstone-managed vehicle is looking to raise capital from up to 32 London-based pension funds for its UK-focused fund.

The London-based Brent Pension Fund has confirmed it has approved a £50 million ($62.7 million; €56.4 million) commitment to a new Stepstone-managed infrastructure vehicle aimed at London pension schemes.

Stepstone was appointed to manage the new fund in the first quarter of this year by the London Collective Investment Vehicle, a group of 32 local authority pension funds based in the UK capital. Brent’s investment, which occurred last month and was confirmed ahead of a meeting next week, is one of the first confirmed commitments to the vehicle.

Stepstone’s diversification in sectors, fund vintages and its ability to make primary, secondary and direct investments were key considerations in its appointment as manager, according to documents published by the Brent scheme.

The documents state that at least 80 percent of the new vehicle is reserved for primary brownfield fund commitments in core and core-plus infrastructure, with up to 20 percent allocated towards direct or co-investments. Targeting a net IRR of 8-10 percent and a cash yield of 4.5 percent, the vehicle will have a slight bias towards the UKK in its of 50-70 percent allocation to Europe, while 30-50 percent will be reserved for the rest of the world. Conrad Hall, chief financial officer of the LCIV, told Brent that at least 25 percent was expected to be invested in renewables.

The documents also show that Hall told the pension scheme that the vehicle would “back out of politically-sensitive investments if [London] boroughs wanted” it to do so. In 2017, when the LCIV was planning the vehicle, it advised funds, including the Camden Council Pension Fund, that investments in UK infrastructure would be “imprudent” given the Brexit vote and a “potential future change of government”. The LCIV denied at the time that it was specifically referring to the opposition Labour Party.

Camden is one of a number of London funds considering investing in the Stepstone vehicle. The borough of Enfield in north London is said to have been weighing up the option against Antin. Pension funds representing Croydon in south London and Islington in the north of the city have also expressed interest.