I read with interest this week that one of the two key players in the bid to buy Stansted airport is a consortium made up largely of pension funds.
The consortium, made up of Australia’s Retail Employees Superannuation Trust (REST), the New Zealand Superannuation Fund, Australasian investment manager Morrison & Co and Wellington-based infrastructure investor Infratil, has emerged as the main rival to Manchester Airports Group (MAG) following the first round of the £1bn bid battle for the Essex airport.
REST, which has 1.9m members and is one of Australia’s biggest retirement funds, has previous form in the UK airport market, having (unsuccessfully) bid alongside JP Morgan for Edinburgh, the airport BAA sold for £807m to Global Infrastructure Partners, the owner of Gatwick and London City airports. However, the £15bn REST fund was more successful in acquiring a holding in Southern Water. The Australian pension fund has also had previous dealings with Ferrovial, the Spanish construction group that led 2006’s £10.3bn purchase of BAA.
Earlier this year REST teamed up with Ferrovial subsidiary Cintra to invest in and operate toll-road projects in Australia.
It is clear how sophisticated the Australian pension funds have come in their infrastructure investments. Through the vast economies of scale which come from industry-wide schemes – which themselves are now rapidly merging with other vast schemes – they have been able to invest directly in a multitude of infrastructure projects, both at home and away. Here in the UK we have a far greater number of pension funds, but most are a lot smaller as a result and those who have looked at infrastructure tend to have done so through a pooled fund approach. The launch of the government’s National Infrastructure Plan, which aims to secure pension fund investment for UK projects and the Pensions Infrastructure Platform, launched by the Pension Protection Fund and National Association of Pension Funds to support pension funds investing in infrastructure projects, have helped create awareness and accessibility for schemes and should get the ball rolling.
Interest in the PIP has been promising, with BAE Systems Pension Funds, BT Pension Scheme, the Railways Pension Scheme, Strathclyde Pension Fund, West Midlands Pension Fund and the Pension Protection Fund all making soft commitments of £100m each. I suspect we are a long way off from seeing investment in new projects, which is what the government is so keen to attract, but it is a step in the right direction. However, if schemes can team up and work together, it would allow them to take ownership of major assets and provide them with steady, long term income – something which seems to be in increasingly hard to come by.
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