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Pension infrastructure platform launch date yet to be confirmed

A launch date for the £2 billion pension infrastructure platform is yet to be confirmed after slipping from January to “the first half of 2013”.

The platform is aimed at creating a structure to enable UK pension funds to inject money directly into infrastructure.

The National Association of Pension Funds and the Pension Protection Fund had initially planned to launch in January 2013 with £2 billion.

But the launch of the PIP will now happen “in the first half of 2013”.

A NAPF spokesperson could not confirm a specific launch date.

So far, £700m has been pledged and a number of founding investors have signed up, aiming to raise £1bn.

Committed funds include the BAE Systems Pension Funds, BT Pension Scheme, Pension Protection Fund, The Railways Pension Scheme, Strathclyde Pension Fund, and West Midlands Pension Fund.

A number of other pension funds are actively considering becoming founding investors, said the NAPF.

The PIP’s inception followed Chancellor George Osborne’s claim in the 2011 autumn statement that British pension funds could invest £20bn into UK infrastructure.

While there is an appetite to invest in long-term, interest-linked assets, a lack of experience in the sector and concerns over construction risk remain central barriers and mean the platform’s initial investments are unlikely to be in new build.

The NAPF has said previously that they will start with existing assets that are “at the lower risk end of the infrastructure spectrum.” 

It added that the PIP is expected to invest “in core infrastructure, and in projects free of construction risk and on an availability basis so as to avoid excessive GDP risk”.

A six-week consultation was also launched in November, with proposals to give local authority pension schemes greater freedom to invest in infrastructure. If proposals move ahead, it could apply to 89 funds and unlock £22bn.

Pension investment in infrastructure is currently restricted by a DCLG rule that caps a local pension fund’s commitment to limited partnerships, which the route funds take to invest in infrastructure, at 15 per cent. This could double under the changes.

The PIP:

It will feature low leverage – no more than 50 per cent per project - and across the PIP as a whole.

Fees will be low – ca 50bpts. Investments will be inflation-linked and the fund is seeking long-term cash returns of RPI +2 to 5%.

In the process of selecting a manager to run the platform.

It is looking at investment criteria, asset preferences and fee structures. FSA authorisation, if needed, will be sought.

Subject to these stages being completed satisfactorily, the Founding Investors will provide investment capital.

Open to all sizes of pension funds, aims to meet schemes’ demand for inflation-linked, long-term investments.

The aim is to launch in the first half of 2013.

The PIP is being developed for pension funds by pension funds. It is fully independent of the government, although it maintains a constructive relationship with HM Treasury.

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