* Key investment vehicle close to securing founding fund
* Big pension funds mull decision to join fund
By Raji Menon
LONDON, July 25 Britain's first multi-billion
pound infrastructure fund to be seeded by pension fund investors
is on track to launch early next year, after receiving a strong
response from funds keen to invest in government projects such
as roads and power plants.
The Conservative-led ruling coalition plans to inject as
much as 20 billion pounds of pension fund money into tired
British infrastructure through vehicles like the Pension
Infrastructure Platform (PIP), to support the ailing economy.
Joanne Segars, CEO of umbrella body the National Association
of Pension Funds (NAPF), which backs the project, told Reuters
PIP was on course for an early 2013 launch despite worries the
vehicle would fail to attract the required number of investors.
"We are close to getting our pool of founding members. A
good number of pension funds have signed up," Segars said,
declining to confirm an exact number.
The fund is initially seeking to raise up to 2 billion
pounds from 10-12 pension fund investors, with leverage taking
the total investment to between 3 billion and 4 billion pounds.
Only the Strathclyde Pension Fund, has publicly signed up to
the scheme so far, but others including the London Pension Fund
Authority (LPFA), which has assets of around 4.2 billion pounds,
and the 5 billion pound Merseyside Pension Fund, told Reuters
they were considering participation.
The infrastructure fund will invest in brownfield projects
-- assets that are already built and earning income -- or
projects where the government will take on some of the
construction risk with aim of achieving returns of 2-5 percent
Segars said the government's announcement last week of
offering guarantees on big infrastructure projects would give
pension funds "more confidence" to invest. The LPFA said it
wanted more detail on those guarantees and clarity on how many
other pension funds were signing up before making a decision.
UK pension funds allocate only 2 percent of total assets to
infrastructure investments, but LPFA Chief Executive Mike Taylor
said interest in the sector is growing.
"The reason for that is the newer types of of infrastructure
funds are not so much the private equity lookalikes that we had
when we first started investing in infrastructure, but they are
more geared to long-term, stable, inflation-linked cash flows
which are a good match to our liabilities," he said.
The UK's second largest scheme, the 32 billion pound
Universities Superannuation Scheme (USS), which already invests
close to 1 billion pounds directly in infrastructure said it was
interested in working alongside the PIP as a partner in deals.
Mike Powell, head of alternatives at USS, said: "In the UK,
there are very few funds that we could team up with for
transactions. If the PIP was successful, it would be an obvious
partner for us to do deals in the UK."