Out-Law News 2 min. read
23 Jan 2015, 5:15 pm
The Greater Manchester Pension Fund (GMPF) and London Pensions Fund Authority (LPFA) said that the collaboration would allow them to increase their infrastructure investments, delivering long-term results to match their liabilities while providing much-needed infrastructure investment. Although the funds will "use their local presence" to identify suitable investments, they said that they were open to opportunities elsewhere in the UK.
"In the UK, we are only beginning to realise the potential for public pension funds to support the development of infrastructure projects at the same time as delivering sustainable, high-quality returns to scheme members and employers," said Kieran Quinn, councillor and chair of GMPF. "GMPF are long-standing investors in infrastructure and we look forward to using our experience and knowledge to help build this into something of great value to the UK as a whole, with an initial focus on Greater Manchester and London."
GMPF is the largest local government pension scheme in the UK, with around 340,000 members and assets of £16 billion. LPFA's pension fund is worth £4.96bn and the scheme has over 81,000 members. GMPF in particular has a history of investing in local infrastructure, including in the Airport City enterprise zone and an office block at One Saint Peters Square in Manchester city centre.
Infrastructure law expert Chris Hallam of Pinsent Masons, the law firm behind Out-Law.com, said that the announcement was "very encouraging". However, he said it was not yet clear whether the funds planned to invest in projects at the construction stage, or whether they would only invest in existing infrastructure assets.
"Whilst pension funds have demonstrated that they will readily take a stake in infrastructure assets that already exist, they have tended to be somewhat less enthusiastic about investing in projects where construction has not been completed," he said. "Indeed, the current state of the Pensions Infrastructure Platform demonstrates as much: three years in and only a few hundred million has been committed, and most of that has gone to the 'secondary market' of already-completed projects, rather than anything new."
"If the Greater Manchester and London pension funds are prepared to invest in new infrastructure it could be a massive fillip for the industry, and may persuade other funds to make a similar move. There is reason to hope that they will, with GMPF having already invested significantly into the on-going Manchester Airport City development," he said.
The creation of the Pensions Infrastructure Platform was announced in November 2011, when the UK Treasury signed an agreement with the pensions industry to work together on the creation of an efficient investment platform for private pension fund managers. It is managed by fund manager Dalmore Capital, and was the first pooled infrastructure fund for pension funds in the UK.
LPFA chief executive Susan Martin said that the new partnership with GMPF would help the London pension fund work towards closing its deficit.
"To meet our pensions liabilities we need a balanced portfolio that includes assets with a long term profile, while at the same time by focusing on British infrastructure we are investing in an area that so badly needs it," she said.