Infrastructure push leaves some execs uneasy
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • Coller Capital collects $9 billion with latest secondaries fund
      Directional signs respresenting types of traditional and alternative investments
      Setter: Alternative secondary deals drop 27.7% in 2020
      Kennedy Lewis raises $2.1 billion for latest opportunistic credit fund
      Emma Davies
      Octopus Ventures chooses co-CEO
    • Bill Foley
      SPAC agrees to $7.3 billion deal with Alight
      Jason Schwarz, chief operating officer of Wilshire,
      New owners have big plans for future of Wilshire
      Amy Hsiang
      Meketa picks new public markets manager research director
      Will Martindale
      Cardano Group chooses group head of sustainability
    • Steve Foresti
      Despite a truly frightening March, funds ended year in great shape
      Mexico manages breakthrough in virus-marred year
      Coronavirus throwing retirement systems into a deepening hole
      COVID-19 hinders emerging Europe's hopes for DC boost
    • Jan Jacobson
      High-court ruling thwarts ERISA stock-drop lawsuits
      Joni Tibbetts
      Principal counts on advisers to get word out on PEPs
      Kenneth J. Munro III
      Empower names new national sales director
      Fidelity cuts target-date asset threshold for lower fees
    • Shannon O'Leary
      Resisting diversity could lead to termination
      Ontario Teachers commit to net zero emissions by 2050
      LaSalle Investment Management taps 2 for new ESG roles
      Sovereign credit ratings vulnerable to ESG risks — Moody’s
    • Ryan Tedder
      Strike up the band: KKR fund takes majority stake in Ryan Tedder catalog
      Helen Dean
      NEST’s Helen Dean earns U.K. recognition for service
      Hawk's Nest dam
      Brookfield donates golf course for firefighter training center
      Gifford Fong
      Old ties help bring local version of JOIM to mainland China
    • Shanghai skyline
      Global hedge funds struggle even in a more open China market
      The Sun Hung Kai Properties Ltd. logo is displayed on the Sun Hung Kai Centre building in Hong Kong on Sept. 13, 2018
      SHK spins out East Point Asset Management
      Man holding a business card with Hedge Fund written on it
      Hedge funds chalk up decade’s best returns in 2020 – HFR
      New hedge fund launches surpass liquidations in third quarter
    • Jan Jacobson
      High-court ruling thwarts ERISA stock-drop lawsuits
      Shannon O'Leary
      Resisting diversity could lead to termination
      Investors ready for change as Democrats take control
      George Antonopoulos
      SPAC launches leap, but institutions are wary
    • Rene Buehlmann
      Standard Life Aberdeen makes senior leadership changes in APAC, U.K. and EMEA
      State Street, Northern Trust both prepare for layoffs
      Marques Benton
      Loomis Sayles chooses first chief diversity officer
      Standard Life Aberdeen CEO Stephen Bird
      Standard Life Aberdeen CEO: Some staff won’t get bonuses
    • Marcie Frost
      California pension funds learning from experience
      A sign outside California Public Employees' Retirement System headquarters in Sacramento
      CalPERS expecting to announce new CIO this quarter
      The Great Seal of the State of New Mexico in the House of Representatives chamber within the New Mexico State Capitol in Santa Fe
      New Mexico PERA executive director taking new position
      ABP calls for clarity over funding ratio rules
    • Rene Buehlmann
      Standard Life Aberdeen makes senior leadership changes in APAC, U.K. and EMEA
      The Great Seal of the State of New Mexico in the House of Representatives chamber within the New Mexico State Capitol in Santa Fe
      New Mexico PERA executive director taking new position
      Marques Benton
      Loomis Sayles chooses first chief diversity officer
      Charles Wu
      State Super appoints chief investment officer
    • Pension funds continue private equity investing spree
      Big jump in private equity AUM expected over next 5 years
      Thoma Bravo takes in $22.8 billion for 3 funds
      Jason Thomas
      Data, technology become new prized possessions
    • Chiang Ling Ng
      Hines hires first head of Asia-Pacific real estate investments
      Brand new apartment building on sunny day in spring with blooming trees
      Real estate returns forecast to trend lower – report
      Ivanhoe Cambridge Inc. signage is displayed outside the company's office near Bay Street in Toronto on Aug. 29, 2011
      Ivanhoe Cambridge, PAG announce joint venture for Japan logistics investments
      Residential buildings in Hong Kong on Feb. 20, 2020
      KKR closes first Asia-Pacific real estate fund at $1.7 billion
    • Neal and Brady
      Retirement security could be only issue both sides accept
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      David Ireland
      Sponsors returning to questions about in-plan annuities
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
    • Retirement in emerging markets
      Outlook 2021
      The top 10 stories of 2020
      The best places to work in money management
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • Houston Firefighters puts $180 million into 3 funds
      LACERA allocates up to $442 million with 6 managers
      BBC Pension Scheme re-signs HSBC as global custodian
      Stanislaus County Employees earmarks $20 million to buyout fund
    • Houston Firefighters puts $180 million into 3 funds
      LACERA allocates up to $442 million with 6 managers
      BBC Pension Scheme re-signs HSBC as global custodian
      Stanislaus County Employees earmarks $20 million to buyout fund
    • International Small Cap Manager Services
      Financial Expertise
      Passive Index Manager Services
      Emerging Markets Equity Investment Management Services
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Infrastructure cartoon
      You must go big on infrastructure, Mr. President
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      view gallery
      25 photos
      2020 in editorial Cartoons
      view gallery
      25 photos
      Cartoons depict a year like no other
    • GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
      Gold Outlook 2021
      Bond ETFs show maturity during Covid market mayhem
      2021 Outlook: A rousing recovery
    • Charles E.F. MIllard
      Commentary: It’s time to make 401(k) plans into real pension plans
      Michael McNally
      Commentary: New ‘investment-plus’ test poses risks to private equity investors
      Adam Waterous
      Commentary: Institutions urged to act now on opportunities created by current global oil disruption
      Ron Lagnado
      Commentary: Straw man critiques don’t hold up in face of real world success
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • Sponsored Content By MassMutual
      Leveraging Data to Manage Risk
      Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
      Sponsored Content By Aberdeen Standard Investments
      Taking a passive approach to the hedge-fund universe
      Sponsored Content By World Gold Council
      Gold: the most effective commodity investment
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      1:24
      U.S. stocks were 2020’s comeback kid
      watch video
      1:23
      Outlook 2021
      watch video
      1:52
      Buy gold's pullback?
      Coronavirus and the S&P 500: 2020
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      Lessons From 2020: OCIO Model Passes Major Test of Governance
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
    • POLL: Retirement issues in 2021
      POLL: Money managers' priority in Asia-Pacific region
      POLL: Retirement issues in the presidential election
      POLL: The S&P 500 in the third quarter
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • Graphic: A look at hiring activity in 2020
      Riskwatch for Q4 2020
      Taiwan Semiconductor’s No. 1 in the emerging markets book
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Getting Back to Normal: How to Creatively Manage Fixed Income Portfolios in a Rising Rate Environment
      Lessons From 2020: OCIO Model Passes Major Test of Governance
      What might a Biden DOL and SEC mean for retirement plans?
      Staying on target with target-date funds
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. DEFINED BENEFIT
October 19, 2015 01:00 AM

Infrastructure push leaves some execs uneasy

Sophie Baker
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Jeff Houston thinks the wealth funds will be nudged toward infrastructure investing.

    The expectation of increased allocations to U.K. infrastructure by channeling England and Wales' 89 local government pension funds into six British wealth funds has left sources in the pension fund and consulting industries with some major concerns.

    In his speech at the annual Conservative Party conference, George Osborne, chancellor of the exchequer, made clear his desire for part of the £190 billion ($288.6 billion) of assets within these public sector pension funds be put to work building a “better Britain.”

    “The infrastructure aspect is the most controversial thing” in the government's plans for the Local Government Pension Scheme funds, said a pension executive, who requested anonymity.

    The concern was raised by the chancellor's Oct. 5 speech. He said: “We are going to find new ways to fund British infrastructure that drives our productivity. At the moment we have 89 — 89 — local government pension funds with 89 sets of fees and costs. It's expensive, and they invest little or nothing in our infrastructure.”

    “Crucially,” said Mr. Osborne, the six British wealth funds, which will be “spread across the country ... will invest billions in the infrastructure of their regions.”

    Figures from the Treasury said that across about £180 billion of LGPS assets in 2012-2013, only about 0.5% was invested in infrastructure projects.

    The pension fund executive said his concerns included the focus on U.K. infrastructure investment, while many of the LGPS invest internationally for diversification purposes; and conflicts of interest when it comes to deciding where to place investment in infrastructure.

    “Regional infrastructure ... introduces the potential for significant conflicts of interest if local politicians think they have a pot of money to spend on pet projects.” LGPS, he said, have a fiduciary responsibility to invest in the best interests of their beneficiaries.

    And there is a bigger concern. “If the Treasury mandates infrastructure investment, some legal opinion indicates our assets and liabilities (more significantly) need to go on the national balance sheet — the last thing they want,” the executive said.

    Sources debated whether the government could mandate an allocation to U.K. infrastructure from the British wealth funds. A source familiar with the situation said there are no stipulated infrastructure mandates or targets on the funds. He reiterated the government's hope that the LGPS — told in the U.K.'s Summer Budget July 9 that they were expected to come forward with pooling proposals — would be “ambitious.”

    At the time of the Summer Budget, the government also warned that backstop legislation would be developed to “ensure that those administering authorities that do not come forward with sufficiently ambitious proposals are required to pool investments.”

    Jeff Houston, head of pensions in London at the Local Government Association, said while each of the six British wealth funds would not be forced to allocate a certain percentage of assets to U.K. infrastructure, “it may be that proposals would have to spell out how they provide the potential for more opportunities in cost-effective infrastructure investment.”

    The LGPS has plenty of examples to look toward for inspiration in their pooled infrastructure investment. Sources highlighted examples including:

    nThe £16 billion Greater Manchester Pension Fund, Manchester, England, and the £4.9 billion London Pensions Fund Authority, London, in January teamed up to commit up to £500 million to invest in infrastructure opportunities;

    nFive Swiss pension funds came together in July 2014 to commit 300 million Swiss francs ($308.9 million) of assets to invest in infrastructure through the not-for-profit IST Investment Foundation. One aim is to invest in domestic infrastructure;

    nA group of 10 U.K. pension funds came together with the National Association of Pension Funds to create the Pensions Infrastructure Platform, which has already helped make more than £1 billion of commitments to U.K. infrastructure projects. The platform launched in 2011; and

    nMelbourne, Australia-based IFM Investors, which launched more than 20 years ago and is owned by 30 not-for-profit pension funds. The firm invests in infrastructure among other asset classes.

    However, sources said far more government guidance will be necessary before LGPS can contemplate pooling.

    “The government's approach of creating big schemes and pushing toward investment in infrastructure kind of misses the point,” said Andrew Kirton, EuroPac investments leader at Mercer Investments in London. “(They) should be thinking, "How do you make infrastructure an attractive asset class?' Where (pension funds) aren't investing more in infrastructure, it might be to do with size, but probably (is more) to do with the way infrastructure deals are constructed, the risks of infrastructure. I think a lot of institutional investors are nervous of investing ... and there are clear risks.”

    Mr. Kirton said he was “slightly perplexed” that more attention had not been paid to making infrastructure “attractive to institutions” through guarantees and other methods. “(There is) a lot that the government could do that would draw investors in.”

    Roger Urwin, global head of investment content in Reigate, England, at Towers Watson & Co., said that investment in infrastructure will take time, and to imagine that local authorities could become a big factor in funding particular types of infrastructure in the near term is “a bit of a stretch.”

    “That said, if (the government) can solve the problems of approaching infrastructure in an effective manner,” it could make a difference over a period of time, Mr. Urwin said.

    Related Articles
    U.K. eyes pooling public fund assets into 6 megafunds
    IFM Investors names next global head of debt investments
    IFM expands debt investment team
    IFM Investors expands North America debt team
    Recommended for You
    Underfunded public plans facing a new round of woes
    Underfunded public plans facing a new round of woes
    NISA pension surplus risk index, funding down in January
    NISA pension surplus risk index, funding down in January
    PPF 7800 index funding deficit falls in September
    PPF 7800 index funding deficit falls in September
    Research for Institutional Money Management
    Sponsored Content: Research for Institutional Money Management
    sponsored
    Events
     
     
    Sponsored
    White Papers
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    Gold Outlook 2021
    Bond ETFs show maturity during Covid market mayhem
    Global gold-backed ETFs: A popular gateway to the gold market
    2021 Outlook: A rousing recovery
    Climate change and emerging markets after Covid-19
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    Connect With Us
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    Our Mission

    To consistently deliver news, research and analysis to the executives who manage the flow of funds in the institutional investment market.

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center