The Pensions Infrastructure Platform has been authorised as an investment manager by the Financial Conduct Authority and is tipped by industry experts to be a top contender in fulfilling the role of “national infrastructure platform” for local authority schemes.
PiP took an important step up the rungs to maturity this week to become a fully-fledged UK alternative investment fund manager.
The platform was established in 2013 to encourage investment in infrastructure by UK pension schemes of all sizes and aimed to attract up to £20bn in capital from funds across the country.
The Pip is really an existing national infrastructure platform and is designed to try and give cost-effective access… to UK institutional pension funds
David Walker, Hymans Robertson
However, since launch, the platform has fallen short of this target, attracting just £1bn.
The FCA authorisation will enable PiP to evolve from a platform of underlying managers to being able to directly manage assets on behalf of investing pension schemes.
Mike Weston, chief executive of PiP, said: “We’ve been subject to criticism from some parties that PiP is just a fund of funds; the ambition has always been that PiP will internally manage funds.”
“We’re removing that extra layer from the whole asset management value chain so pension schemes will invest in a PiP fund and PiP will manage it.”
Building resources and a pipeline of opportunities has formed the basis of PiP’s work towards a “buy-to-build strategy” in UK infrastructure, said Weston, while putting the necessary steps in place to achieve FCA authorisation.
“In terms of buy-to-build, [we have] moved from being a platform or a conduit that’s helping to mobilise investments, to a fully-fledged asset manager that is sourcing, executing, managing assets and delivering returns to our investing pension schemes,” he said.
National platform
The UK’s infrastructure market is brimming with opportunities, Weston said.
However, there have been repeated calls to better align avenues of supply and demand for pension scheme investors.
This year will bring huge changes for Local Government Pension Scheme funds, which are under strict government orders to increase infrastructure investment and improve economies of scale via asset pooling.
In February, the 89 funds will submit initial proposals laying out their plans to help create six ‘British wealth funds’ of at least £25bn each.
David Walker, newly appointed head of LGPS investment at consultancy Hymans Robertson, said the timing of PiP’s development was favourable as funds are in the midst of putting together their pooling plans.
“In terms of infrastructure, there is a lot of debate [that] some form of national infrastructure platform might be the best solution for LGPS funds,” he said.
“The PiP is really an existing national infrastructure platform and is designed to try and give cost-effective access… to UK institutional pension funds.”
Building change
Dave Lyons, head of public sector pensions at consultancy Aon Hewitt, said PiP’s ability to raise capital will be a key determinant to the role it will play in the future of LGPS infrastructure investment.
“[The authorisation] is an interesting development,” said Lyons, but cautioned: “The institutional market can be very interested in track record and it can take a while to build that track record.”
Lyons said a move by infrastructure managers towards lower fees would be positive for the LGPS and could give PiP a competitive advantage.
As managers build their propositions, Lyons added there was likely to be a “battle for talent”.
