The National Association of Pension Funds (NAPF) did not have a particular asset class in mind when it initiated the search for a manager last year for its not-for-profit Pensions Infrastructure Platform (PIP). Few though were surprised that equities was its inaugural fund. Institutional investors – especially those on the smaller end – are a fairly conservative group, although in time they are expected to leave their comfort zone.
“Equity, especially social infrastructure, is easier to understand than for example, an investment into renewable energy. There is also a greater visibility and more benchmarks in terms of fees and track-record for many managers on the equity versus debt side.”
David Cooper
“We did not set out that equities would be the number one fund and debt number two,” says Edward Bogira, NAPF chief of staff. “The reason we chose equities was because Dalmore Capital (which won the mandate) presented the most compelling case and the best offering. It was also one upon which all the investors agreed. It was felt that Dalmore really understood what pension funds wanted – long-term stable inflation- linked cash flows. However, we do not have a closed mind and will be looking at other types of funds in the future.”
The PIP, which is modelled on Australia’s Industry Funds Management (IFM) – a fund manager owned by 30 major not-for-profit pension funds – was launched three years ago to give smaller and medium-sized funds a chance to access infrastructure through a pooled vehicle. The aim is to offer low risk, index-linked investments that can generate returns of 2.5% a year above the retail prices index with annual fees in the region of 0.5%. This is in contrast to the fees of 1% or more charged by some private sector managers, plus performance fees in some cases.
A stuttering start
As is often the case with these types of initiatives, there have been teething problems. It took longer than expected to develop a structure and appoint a manager. The result was that the first investment did not happen last summer as anticipated but in April this year, when Dalmore acquired nearly 50% of a portfolio from the pension fund for construction company Interserve. The price tag was not disclosed, but the 13 assets included schools, government accommodation and projects overseen by the UK’s Ministry of Defence.
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