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London pension funds to pool assets, target infrastructure projects

18 Feb 2013

Edmund Truell London Pensions Fund AuthorityLondon’s fragmented local authority pension funds are planning to switch strategy to target the capital’s infrastructure projects amid a reported move to pool their assets in a single £40bn investment giant.

Edmund Truell, pictured, the new chairman of the London Pensions Fund Authority, told the FT the new vehicle would manage the assets of all 32 London boroughs, Transport for London and the LPFA itself.

No timescale was given to the newspaper by Truell, who said it was a matter for the individual borough funds, adding fee-chargers with vested interests such as actuaries and consultants would need to be overcome.

The move comes as Truell announced LPFA had become the tenth signatory to the £2bn Pensions Infrastructure Project, which will help finance long-term infrastructure creations the UK Government hopes will boost the economy.

Founding PIP signatories include the BT, Lloyds and British Airways pension funds.

The PIP will be used to invest in projects free of construction risk with leverage of up to 50 per cent, with fees around 50 basis points.

It is targeting long-term cash returns of between two per cent and five per cent above the retail price index, a measure of UK inflation.

Truell said, “Recent political commentary has raised the debate surrounding infrastructure investing and its benefits to the UK economy.

“The government has estimated funding needs of between £40bn and £50bn in infrastructure annually over the next decade, and this new fund will form a material part of meeting those needs.

“We are delighted to able to support this initiative while at the same time being confident that our funds will enjoy attractive, risk-mitigated returns.

“While investment through the PIP will be dedicated to pre-existing infrastructure projects, freed funding will in addition allow the UK government to commit to new construction of schools, hospitals and roads.

“That is a clear and direct benefit to society and to the economy.”

LPFA chief executive Mike Taylor said, “The LPFA is committed to meeting its liabilities for the long-term benefit of pensioners, and the PIP achieves that.

“Aggregating smaller pools of assets under a larger management structure makes sense for infrastructure investing, allowing us to provide the scale of funding these large projects require, increasing our bidding power, providing better access to expertise and lowering fees.”

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