Ambitious LPFA joins Pensions Infrastructure Project

The London Pensions Fund Authority has become the tenth founding investor in the Pensions Infrastructure Project (PIP).

The PIP is now backed by the LPFA, seven corporate pension funds and two council funds (West Midlands and Strathclyde). Each signatory will at first invest £100m. The fund is expected to invest in a variety of infrastructure projects.

Mike Taylor, chief executive of the London Pension Fund Authority, explained: “We don’t believe the market has provided the sort of funds we want to invest in, hence the push to create a fund to invest in infrastructure.”

Several of the founding funds behind the PIP are, said Taylor, on the cusp of private/ public companies. They include BT and the Railways Pension Scheme. The LPFA itself provides Local Government Pension Scheme benefits to ex-employees including those of the Greater London Council and the Inner London Education Authority.

Aggregating the smaller pools of assets under one large umbrella makes sense for infrastructure investing, said Taylor, providing the correct scale for projects along with lower fees, better access to expertise and increased bidding power.

The LPFA has also been gunning for a pan-London pension fund to unite the 32 boroughs. An interview with incoming LPFA chairman Edmund Truell in this week’s Financial Times Fund Management section reported the superfund as a done deal writing: “The merger comes at a time when many funds are struggling with deficits”.

Taylor said that the merger is what the LPFA “has been working towards, it has been conjectured for quite a while”. If the London boroughs all volunteered to join a London fund a change in the law governing the separate pension funds would not be required, added Taylor.

Finance directors at the London Boroughs have expressed varied opinions on a combined fund in past interviews for Room 151. Jonathan Hunt, tri-borough director for treasury and pensions for the London Boroughs of Westminster, Hammersmith and Fulham and Kensington and Chelsea said that he was not for pooling assets. “Each local authority has to remain sovereign, particularly over pension funds,” he said. “Any change to that would require a change of legislation.

Chris Buss, finance director at Wandsworth said: “An amalgamated scheme wouldn’t work for us because we are high performers. If you’re a low performing scheme you might wish to join in to it but why should we as a high performing scheme go in with a low performing scheme because all that is going to do is cost our council tax payers?”

However Camden’s Mike O’Donnell, who currently shares some pensions back office with Wandsworth said: “I have long been a supporter of amalgamation of some of the activities of some of the schemes in London. Funds of £800m to just under a billion don’t have the opportunity to look at investment in the way larger funds do.”