Alistair Ray, CIO of Dalmore Capital, discusses why UK based infrastructure assets remain attractive, how Dalmore approaches the market, and why co-investment can help LGPS investors align portfolios with regional priorities.
UK infrastructure is moving higher up the agenda for institutional investors, particularly as Local Government Pension Scheme (LGPS) funds face increasing pressure to allocate more capital domestically. Against that backdrop, Dalmore Capital believes the case for UK infrastructure has rarely been stronger.
Q: Why does UK infrastructure stand out as an attractive allocation for long-term investors at this point in the cycle?
Alistair Ray: The UK infrastructure market is deep, established and has a long history of delivering the characteristics long-term investors want: low volatility, lower risk and yield-based returns. It has also tended to be counter-cyclical relative to listed equity and debt markets.
We have seen that resilience through multiple market shocks, from the dot-com downturn, the global financial crisis and COVID-19. Core infrastructure assets have continued to provide stable returns when other asset classes have come under pressure.
For UK investors specifically, currency is another major advantage. If you are targeting low double-digit returns from long-duration assets, adding foreign exchange volatility on top can materially impact outcomes over time. For sterling-based investors, allocating to sterling assets removes that layer of uncertainty.
There is also a compelling valuation case today. We are seeing less competition for UK assets than in US dollar or Euro markets, where there is significant global capital chasing deals. In sterling assets, there are fewer active buyers, which can create more attractive entry pricing and lower transaction risk.
Many of the opportunities we are currently pursuing are bilateral rather than auction-driven. That gives investors access to assets that would have attracted far more competition five years ago.
Q: How would you describe Dalmore’s core investment strategy, and what types of infrastructure assets do you specialise in?
Alistair Ray: Infrastructure is supposed to be boring. That may not sound exciting, but for pension funds and other long-term investors, boring can be exactly what you want.
Our focus is on core and core-plus infrastructure: tangible, essential assets in sectors such as energy, transport and social infrastructure. These are assets people understand and rely on every day.
We look for investments that generate strong income, offer some growth potential and avoid unnecessary complexity or technology risk. We are cautious about sectors attracting large amounts of speculative capital or where long-term demand assumptions may be less certain.
Equally important is our focus on the mid-market, where we believe active ownership can add value. That may mean providing expansion capital, improving operations or supporting strategic development.
A good example is the Cory energy-from-waste plant in East London, where capital has supported the development of a second facility, significantly increasing capacity. Future plans could include carbon capture infrastructure and heat networks that support London’s broader decarbonisation agenda.
That combination of stable existing cashflows with the ability to enhance assets over time is what we mean by core-plus.
Q: How important is the government’s agenda around LGPS funds scaling up their local investment, and how does Dalmore’s investment strategy align with these objectives?
Alistair Ray: We are very supportive of the government’s objective, provided there are attractive opportunities available—and we believe there are plenty of them.
Many UK pension schemes can access infrastructure through global or pan-European mandates, but that does not necessarily guarantee exposure to the UK market. Our proposition is different: we are overwhelmingly focused on UK infrastructure and have deep market knowledge across the country.
That allows us to source opportunities beyond the large, headline-grabbing transactions that attract the biggest international investors.
It also means investors can see the real-world impact of their capital. Whether it is new hospitals, schools, renewable energy projects or environmental infrastructure, there is a clear connection between investment returns and economic benefits for local communities.
A good example is the Thames Tideway Tunnel, where multiple UK pension funds invested alongside us. That project is delivering attractive long-term returns while also helping transform the River Thames and London’s environment.
For LGPS investors in particular, that place-based impact can be highly valuable.
Q: How do co-investments work in practice at Dalmore, and what types of partners are best suited to invest alongside you?
Alistair Ray: Co-investment has been a core part of our model for many years. Of our nearly £6 billion in assets under management, around two-thirds has been deployed through co-investment structures.
In practical terms, investors may commit to a diversified fund strategy while also allocating additional capital into specific assets that particularly suit their objectives.
That can be useful for several reasons. Some investors use co-investment primarily to reduce fee drag and gain more direct exposure. Others use it selectively to tilt portfolios towards themes that matter most to them, such as renewable energy, social assets or projects in their home region.
We have seen this with Scottish LGPS investors who wanted greater exposure to hydro assets located in Scotland.
The ideal co-investment partners are long-term institutions seeking stable, lower-risk returns and willing to invest patiently over a 10-year horizon. Naturally, that includes UK pension funds and LGPS pools, but we also see interest from overseas institutions that value the UK’s legal framework, regulatory stability and attractive risk-adjusted pricing.
Q: Since becoming part of Royal London Asset Management, how has Dalmore’s ability to invest evolved, and what does this mean for your approach going forward?
Alistair Ray: Joining Royal London Asset Management has strengthened our platform significantly.
The most obvious benefit is greater access to capital, both through Royal London’s balance sheet and through its broader client relationships. That enhances our ability to scale as a specialist UK infrastructure manager.
There is also a strong strategic fit. Dalmore is highly UK-focused, and Royal London shares that long-term commitment to the domestic market.
Importantly, Royal London’s mutual structure aligns well with our philosophy and with the needs of many LGPS clients. It supports a longer-term approach centred on client outcomes rather than short-term shareholder pressures.
Looking ahead, our strategy remains consistent: focus on core and core plus UK infrastructure, identify attractive opportunities in a less crowded market, and help investors access assets that can deliver both resilient returns and tangible economic benefits.
For more information on Dalmore and their approach to infrastructure investing, please visit Dalmore Capital.
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The information contained in this document has been compiled with considerable care to ensure its accuracy at the date of publication. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change. However, no representation or warranty, express or implied, is made to the document’s accuracy or completeness.
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