Infrastructure projects failing to attract pension fund cash

Tim Wallace
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INFRASTRUCTURE investment projects are still not set up in an attractive way for most pension funds to invest, the industry warned yesterday, despite the government spending the last year trying to persuade the funds to put money into big projects.

“The aim is to create a fund for pension funds, creating a market for funds to invest to deliver what they need – long-term, low risk, inflation-linked returns with low leverage,” said Joanne Segars from the National Association of Pension Funds (NAPF).

“At the moment, they are often highly leveraged and geared, at the expense of inflation linking, so the projects are riskier than pension funds really want.”

Segars said pension funds want the government to review the structure of contracts, looking to favour long-term, low risk investors.

She also warned that they need to find a way around political instability, in case a future government changed the rules on infrastructure assets held by pension funds.

And she added that funds want to avoid construction risk associated with the projects.

“We are not going to build a £2bn fund overnight, but we have got a good number of investors interested so far and hope to launch in the first half of next year,” Segars said.

But Treasury minister Danny Alexander argued steps have been taken in the right direction.

“Pension funds have made good progress, and we are seeing more interest,” he told City A.M.

“Now they have money on the table, we have the ability to engage in projects to suit them.”