One of London’s local authority pension funds is delaying its move into infrastructure due to concerns over market pricing and proposals for a collective investment vehicle (CIV).
A report prepared for Camden Council’s pensions committee said infrastructure’s “popularity may have meant it is now in demand and so at the very least is fairly price to over-priced”.
Camden’s director of finance Nigel Mascarenhas, who wrote the report, noted the likelihood that infrastructure would be one of the next asset classes to be offered by the London-wide CIV. The majority of local government pension schemes in London have committed to the creation of the city-wide investment vehicle, which would look to create economies of scale.
“Given that infrastructure is relatively expensive, and the London CIV may look at this next, the fund should focus on private equity ahead of any decisions on infrastructure that are likely to be the subject of better value vehicles,” the report said.
The Department for Communities and Local Government has recently concluded a consultation examining a complete shift to passive mandates for all listed investments, as well as launching a number of national CIVs.
Mascarenhas also noted the existence of the Pensions Infrastructure Platform (PIP), backed by the National Association of Pension Funds, as a way of investing in infrastructure.
However, he said it “[looked] likely that this product does not offer the right return profile for us”.
Pension funds worth more than £65bn that initially backed the launch of the PIP – funding launch costs as well as earmarking £100m in initial capital – distanced themselves from the vehicle earlier this year.
The London Pension Fund Authority at the time expressed dissatisfaction with the PIP risk/return profile, while the BT Pension Scheme said it preferred to focus on its direct investment strategy.