Pension funds ‘should invest in infrastructure’

Published on Wednesday, 19 November 2014 14:52
Written by Daniel Mason

The huge pool of capital in British pension funds should be used to invest in infrastructure, Sir Merrick Cockell has suggested.

In a letter to the Financial Times, the deputy chairman of the London Pensions Fund Authority (LPFA) said the strategy would deliver economic and social benefits to local areas while also providing the funds with the long-term inflation-linked returns they need.

Cockell, the former chairman of the Local Government Association, said David Cameron's desire to boost investment in infrastructure was "noble" but existing capital "on the government's doorstep" was being ignored in favour of foreign investment.

"The Local Government Pension Scheme (LGPS) alone has total assets of approximately £178bn across 89 funds," he wrote. "This is of comparable size to the sovereign wealth fund of Qatar. We need foreign investment. But it would be beneficial for British pension funds to invest prudently in local infrastructure."

Cockell was a key speaker at Govtoday's Future of the LGPS conference on 18 November. In his speech to delegates, he called for LGPS funds to be given the ability to pool their assets and expertise to in order to make more complex investments.

In his letter to the FT he said: "As developers plan a King's Cross-style redevelopment at Birmingham's new High Speed 2 (HS2) station, should Mr Cameron not be talking to the LGPS?"

He added: "As LPFA we have proposed voluntary asset liability management partnerships across the LGPS, which would provide all funds with the opportunity to invest actively together in a wider range of assets, including infrastructure.

"LPFA, and I am sure other large LGPS funds, would welcome the opportunity to discuss with the prime minister how best to bring local financing and knowledge to the table and enhance the offer to UK pension funds and overseas investors."

Cockell told the FT he believed ministers did not realise the collective size of British pension funds. His letter was in response to an FT report that the Qatari royal family was in talks with UK ministers to invest billions into regeneration of stations on the HS2 route.

He argued: "They could have had us in the room at the same time. We are here and we are potential investors with local expertise."

But Mike Weston, chief executive of the Pensions Infrastructure Platform, told the FT that investment in new-build construction was "not on the horizon" despite earlier indications by ministers. "There was a fundamental misconception in government about what pension funds can do with their money," he said.

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