UK – The Universities Superannuation Scheme (USS) is to provide nearly £100m (€116m) in long-term financing to a local UK water company, in what the fund is saying is a suitable alternative to government debt in the current low-yield environment.
The deal, arranged by USS Investment Management, will see the £36bn fund provide £95m in 20-year, Class B debt to Affinity Water, active in the South East of England.
The fund praised the inflation-linked nature of the note, saying infrastructure debt was attractive due to the premium it offered, and the fact it shared similar characteristics with its liabilities.
As of March 2012, USS reported a £9.8bn deficit, with liabilities up by nearly 24% over 12 months.
Gavin Merchant, senior investment manager for infrastructure at USSIM, said the manager's investment philosophy was based around strong relationships with a "select number of core infrastructure companies".
"In doing so, we hope to be able to work with the management team of these companies to offer a unique and flexible source of long-term financing," he said.
"We see these relationships as long-term partnerships, where we can potentially provide capital for future financing requirements of the business."
Rob Horsnall, investment manager for infrastructure at the scheme's external manager, said the £95m agreement was a "unique situation", whereby USS was able to offer Affinity funding that provided the utility provider with certainty of pricing over the longer term.
The provider's chief executive Richard Bienfait said he was "delighted" by the Class B debt deal with the fund.
"Their long-term belief in our company, alongside that of the investors who provided our Class A debt, means we can focus our efforts on our vision to be the leading community-focused water company in the UK," Bienfait added.
USS in late 2012 announced that it acquired the rail line connecting Australia's Brisbane airport to the state capital.
The AUD110m (€87m) deal is expected to close in early April.
The Brisbane rail link acquisition followed a similar deal to invest in the Sydney airport rail link alongside several other pension investors.
Both deals, done in cooperation with local infrastructure manager CP2, also received funding from Denmark's statutory pension fund ATP.
According to the Danish fund's most recent annual report published last week, it divested its stake in the CP2 infrastructure vehicle in early 2012.
