Hermes could offer UK local authorities tailored infrastructure vehicle

Hermes could offer its newly pooled UK local authority pension funds a tailored infrastructure vehicle.

The investment manager may provide a dedicated, bespoke infrastructure investment platform for local government pension scheme clients, according to Perry Noble, infrastructure partner at the company, which is wholly owned by the BT Pension Scheme.

Hermes Infrastructure currently has six UK LGPS clients invested in its Infrastructure Fund I vehicle, having treated the schemes as a single client class.

The vehicle, which closed in April last year, attracted £1.2bn (€1.1bn) in commitments – of which £279m was LGPS capital.

Pension funds from Dorset, Cornwall and London’s Barking and Dagenham were among the six, as previously reported.

Speaking at a breakfast held by the asset manager in London, Noble said: “There are material benefits of scale, and we could offer a dedicated vehicle if that is what they wanted to do.”

Noble said that, with greater emphasis on pooling in UK LGPS at present, schemes would need to align their interests closely to be market effective.

“It will take time, and, no doubt, that’s a challenge,” he said. “But there has been significant progress in a short space of time.”

Noble’s colleague, Hamish de Run, said the current scale of opportunity and pricing levels for infrastructure assets meant pooling of capital efficiently was key.

As reported last week, Greater Manchester’s infrastructure joint venture with the London Pensions Fund Authority (LPFA) is set to double in size to £1bn under plans outlined by the UK’s largest local authority fund.

The £17.6bn Greater Manchester Pension Fund (GMPF) said the infrastructure venture was also in talks to work directly with the £32bn Border to Coast asset pool founded by Cumbria, Surrey and North Yorkshire.

The GMPF backed the findings of a previous report that there should only be a single infrastructure vehicle across local government pension schemes (LGPS).

Speaking after the Department for Communities and Local Government closed its first consultation on asset pooling among English and Welsh LGPS, the GMPF – which is collaborating with Merseyside Pension Fund and West Yorkshire Pension Fund to create the £35bn Northern Powerhouse asset pool – said the three funds were targeting an eventual 10% exposure to infrastructure.

There are currently eight asset pools emerging from talks among the LGPS, including the partnership between the LPFA and the Lancashire County Pension Fund.

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