As someone who has closely followed the progress of the Pensions Infrastructure Platform (PIP) since it was announced back in October 2012, the sight of an email with a subject beginning ‘Pensions Infrastructure Platform announces…’ landing in my inbox earlier this week got me rather excited.
But my enthusiasm was soon dampened when I realised the ‘announcement’ was not a fresh revelation but more a development of an announcement made at the end of last year. Essentially, the National Association of Pension Funds (NAPF) added some more detail to the PIP’s first fund to be run by Dalmore Capital, first announced in December.
The new details outlined the fund is a PPP Equity PIP Limited Partnership with a hard cap of £500m, of which £260m has been committed. The NAPF also said further fundraising from other pension schemes will now commence and additional funds will form part of the PIP in due course.
Don’t get me wrong, I don’t mean to be a killjoy and it is reassuring to see both a commitment from UK pension funds and an asset manager with a structure which is palatable to their needs – as well as some forward momentum. However, the positivity of the announcement was somewhat tempered by the fact that only five of the founding 10 pension schemes were listed among the investors for the first close: British Airways Pensions, the Pension Protection Fund, Railways Pension Scheme, Strathclyde Pension Fund and West Midlands Pension Fund.
Where were the other five? Their absence suggests that potentially half of the founding pension fund investors who put their name to the PIP back in October 2012 have pulled out altogether or decided this specific investment was not attractive. Certainly three of the funds have reportedly abandoned the platform: the London Pensions Fund Authority (LPFA), the BT Pension Scheme and BAE Systems fund.
LPFA and BAE cited the pricing and risk/return profile targeted by the PIP now differed from their own objectives, while BT said it had decided to stick with its own infrastructure strategy.
It was interesting to note LPFA’s withdrawal considering it has been so resolute and vocal on consolidating London’s local authority funds into one big ‘mutual fund’ to benefit from economies of scale and shared governance – and particularly for infrastructure investment.
But this just goes to show that consolidating funds in one common aim is never straightforward. While economies of scale and grouping together are attractive and will work for some schemes, unless there is a unity and common objectives there are too many vested interests to make it a quick fix solution – and a scheme should only engage if it achieves the right outcome.
Ultimately it doesn’t really matter which vehicle investors use to access infrastructure as long as the strategy best suits their needs.
Comments