REAL ESTATE - The London Borough of Newham pension fund is to invest £30m (€45m) in infrastructure. The investment, which follows a strategic review and is the fund’s first in infrastructure, reflects a desire to influence the beta aspects of the fund and the search for a guaranteed long-term return.
Funds for the investment will likely be diverted from its equities portfolio.
James Morgan of advisers Hewitt said: "We’ve been recommending infrastructure to several clients. Up to now, [UK pension funds’] infrastructure investments have focused on the UK but we’re looking more at Europe."
However, he added: "Would a UK-focused fund be disadvantaged? I can’t see that being the case."
The fund is tendering for one or more managers for the portfolio.
A report by Standard & Poor’s claims that credit quality is suffering as a result of the rise of global infrastructure funds. The report – The amazing growth of infrastructure funds: too good to be true? – argues that too many funds chasing too few assets have created a pricing bubble.
S&P estimates that $100—150bn (€75.6—113.4bn) of fund money is available for suitable infrastructure projects. "There are no signs that 2007 will be different," said the report.
Without due diligence and risk analysis, it warns, poor credit quality will damage the asset class’s most attractive feature – strong, stable yields.