The South Carolina Retirement System has selected Deutsche Bank subsidiary RREEF America for a global infrastructure securities strategy.
The long-term allocation for the separate account will be up to 2.5% of the pension fund’s $27.8bn (€24.6bn) in total plan assets.
The initial allocation will be $275m, representing 1% of South Carolina’s total plan assets.
The relationship will have a pure-play global listed strategy, focusing on companies where 70% of operating cash flows directly from infrastructure assets.
Return expectations are 6-12%, according to a South Carolina board-meeting document.
The capital will be invested in transportation, regulated utilities and the communication sector in the US and Europe.
Around 50% of investments will be US dollar-denominated, with some emerging currency exposure.
South Carolina believes there are many benefits to a listed pure-play strategy for infrastructure, with a focus on companies with a majority of cash flows attributed to infrastructure assets, complementing private infrastructure investments.
Other benefits are scalability, liquidity, asset diversification and lower fees.
The management fee on the start-up allocation will be 55 basis points, while the relationship is for one year, with four automatic one-year extensions.
Deutsche Bank will not be co-investing in the relationship.