The handouts will keep falling until 2015, the Centre for
Economics and Business Research (CEBR) said on Monday,
reflecting the impact of tougher financial market conditions and
public disquiet over the size of banker payouts.

Yet the impact of the squeeze on the sector goes further
than bonus payments and the researchers also said employment in
London’s banks, brokerages and other financial sector firms -
collectively known as the City – will keep shrinking.

They said this would allow rival centre Hong Kong to
overtake London by size in the next three years.

Banking job cuts have hit London hard in the past three
years as euro zone woes and regulation eat into firms’ income,
and a further slowdown in stock trading and mergers and
acquisitions is expected to affect pay levels for 2012.

Payouts have also fallen after a public backlash over big
bonuses, blamed for helping create the climate which led to the
financial crisis which started in 2008. Shareholders upset about
poor returns are becoming more demanding too.

Shareholder activist group Hermes Equity Ownership Services
(EOS) on Monday called on the industry to base bonus payouts on
a performance period of three to five years, rather than annual
performance, echoing earlier proposals on how payouts should be
calculated.

Hermes EOS, which is owned by the BT Pension Scheme,
Britain’s biggest private sector pension fund, also recommended
banks pay only up to a quarter of their revenue to staff, rather
than the current 40 to 50 percent.

Earlier this year several banks including Barclays
were hit by a bigger than usual backlash from shareholders over
pay when they sought approval for payout plans.

“The money that governments intend the banks to use to
rebuild their balance sheets has been in large part siphoned off
into individuals’ pockets,” Hermes EOS said in a report.

Hermes EOS, which has over $120 billion of assets under
advice, said pay changes were one of the overhauls needed to
make banks investible again.

THE TAXMAN LOSES

London financial sector bonuses for 2012 – likely to be paid
in January or February next year – will be more than 86 percent
down on the 11.5 billion pounds worth of payouts in 2 0 07-2008,
when dealmaking was booming just before the financial crisis,
the CEBR data showed.

Base salaries have risen since then, partly in response to
controversy over incentive-related bonuses, meaning overall
levels of pay have not dropped by quite so much.

The CEBR, which had originally forecast bonuses of 2.3
billion pounds for 2012, predicted they would hit a low of 1.2
billion in 2015 before gently creeping upwards again.

Last year’s bonuses totalled 4.4 billion pounds, it said.

“The biggest loser from this is the taxman, who typically
earns more from City bonuses than the employees,” CEBR Chief
Executive Douglas McWilliams said in a statement.

McWilliams said government revenue from the City – including
from corporation tax and other levies – would likely be around
40 billion pounds for 2012, down almost by half from the 70
billion banked in 2007/08.

In a separate study, the CEBR also forecast that Hong Kong
would overtake London as the world’s biggest international
financial centre in 2015, as Asian markets grow.

Hong Kong employed less than half as many people in
financial services than London in 2005, but job numbers in the
Asian hub will have grown by almost 100,000 in the next three
years.

Meanwhile the City will continue to shed jobs, with another
13,000 set to go next year.

Technically, London is already behind New York by finance
employment levels, but the CEBR said many of the New York jobs
were focused on servicing the domestic U.S. economy, meaning
that for now London retains its crown as the top international
centre.

Hong Kong has gained ground primarily because of more
dynamic growth in Asian economies, the CEBR said, while the
growing use of China’s renminbi as a currency worldwide will
also boost it as a centre.

The fund management arm of Britain’s second-biggest insurer
Aviva is developing funds that will buy stakes in
projects or provide debt funding, interim Chief Executive Paul
Abberley said in an interview on Tuesday.

Aviva’s existing funds hold nearly a billion pounds in
third-party infrastructure assets through a combination of
infrastructure debt, real estate and renewable energy funds. But
Aviva wants to multiply this several times by tapping pension
funds and other institutions.

With volatile equity markets and historically low interest
rates, more and more pension funds are becoming interested in
“real assets” such as roads, schools and hospitals.

To meet this demand, fund managers investing billions of
pounds on behalf of UK pension funds, are hiring infrastructure
teams or adding to their existing staff to help to channel cash
into these types of investments.

“Insurance-owned asset managers are a natural intermediary
between the flows of long-term savings that go into insurance
companies and the capital currently required by borrowers. Given
the longer investment time horizon on these savings, one obvious
investment target is infrastructure,” said Abberley.

Aviva Investors currently has an infrastructure team of
about six but Abberley said the firm could hire externally if it
felt it necessary.

As part of a restructuring aimed at streamlining its asset
management business and reducing costs announced in January,
Aviva Investors cut some 160 jobs or 12 percent of its global
workforce.

The overhaul resulted in senior management departures
including that of chief executive Alain Dromer.

Aviva Investors, which has about 274 billion pounds ($439.06
billion) in assets under management, saw operating profits fall
to 34 million pounds in the first half of the year, compared
with 39 million pounds in the previous year, partly due to lower
performance fees.

Abberley said the firm was tailoring its products for
risk-averse investors seeking more stable returns.

“Our clients are operating in a world of negative real
returns in low-risk, fixed-income assets and potentially a world
of financial bubbles in riskier assets,” Abberley said.

Pension funds hold more than $30 trillion of assets and
sovereign wealth funds some $3-5 trillion, meaning that even a
small shift to lending could help fill some of the gap left by
bank deleveraging.

One new investment that is increasingly popular among
pension funds is direct loans to infrastructure projects, with
lending to businesses for exports, mergers or other projects
amidst the banking drought also on the agenda.

In a major move, APG, asset manager for Dutch civil service
pension fund ABP, the largest in Europe, plans to allocate 2-3
percent of its 314 billion euro portfolio to inflation-linked
loans in infrastructure, utilities and other corporates.

It made its first ever inflation-related loan for a local
road-building project in September.

“We are very interested in doing more of these kind of loans
because it matches the pension fund liabilities and it offers
good risk-return tradeoff,” Valentijn Thijssen, senior portfolio
manager in APG’s Alternative Inflation team, told Reuters.

“The fact that banks are more and more reluctant to enter
this area does help and makes room for us to come in.”

To meet the growing liabilities of an ageing population,
pension funds need to find better returns than the negative
yields offered by core sovereign debt, while sovereign wealth
funds are also diversifying to try to generate more cash.

Both can often afford to make longer-term, less liquid
investments than many other investors.

“What do you do when yields are so low? You can become a
lender,” said Dale Gabbert, head of investment funds, Europe and
the Middle East, at law firm ReedSmith, which acts for sovereign
wealth funds including China’s CIC.

“What they are saying is: if you buy government bonds or
T-bills you are taking risks too, you can lose capital.

“If you compare that to lending … where you could be
getting in excess of 10 percent, the risk-return ratio for
holding government bonds versus lending with some security,
quite often to fairly established businesses, looks pretty
attractive,” Gabbert added.

The International Monetary Fund estimates that European
banks need to deleverage by at least $2.8 trillion in two years
to shore up their capital bases, leaving ample room for
well-funded investors to step in.

Pension funds are not stepping into the sector as fast as
banks are retreating, industry experts say, but deals are being
struck and interest is growing.

PensionDanmark, which has $23.2 billion in assets, bought a
$250 million loan portfolio from Bank of Ireland in June and has
mandated JPMorgan Asset Management to acquire more
infrastructure loans from banks over the next nine months.

The pension fund, one of Denmark’s largest, also struck a
deal last year to make 10 billion Danish crowns ($1.74 billion)
available for the funding of export orders through the country’s
export credit agency EKF. The yield for PensionDanmark is
100-150 basis points above government bonds, the fund said.

“As pension funds, we are challenged by very low interest
rates on government bonds and equity markets are very volatile
and unsecured,” said PensionDanmark’s CEO Torben Moeger
Pedersen. “So we are in search of assets that provide us with
substantially higher yield than government bonds without having
to take on the risk on equity markets.”

He pointed to opportunities opened up by U.S. and European
banks seeking to reduce the share of capital intensive long-term
loans from their balance sheets.

DELEVERAGING

Bank deleveraging also brings opportunities for asset
managers dealing with big ticket investors who do not
necessarily have the in-house expertise or staff to make lending
decisions themselves, industry experts said.

“Increasingly, conversations are focused around how pension
funds can exploit the absence of banks and traditional providers
of capital, whether it’s direct corporate lending or providing
senior debt into real estate,” said Paul Campbell, CEO of Cairn
Capital, which manages over $7 billion.

“Sovereign wealth funds are exploring the same
opportunities. It will become a much more plural community -
there will be banks, sovereign funds, pension funds.”

The sovereign wealth fund industry, which manages windfall
revenues for future generations for countries from Norway to Abu
Dhabi, has been hit by the financial and debt crisis and is
turning to lending as part of its efforts to diversify.

“We have a mezzanine fund which is drawing strong interest
from sovereign wealth funds,” said Patrick Thomson, global head
of sovereigns at JP Morgan Asset Management. “W hen you’re able
to take a five-, seven- (or) 10-year view on those assets there
are tremendous opportunities for higher returns.”

Cindy Qu, analyst at Shanghai-based consultancy Z-Ben
Advisors, said some of China’s sovereign wealth funds have
started this type of lending operations. “They don’t disclose
specific examples but we know they are completing this kind of
lending business through their offshore arms,” she said.

SWFs are also investing in real estate and infrastructure.
Chinese fund CIC made its first foray into UK infrastructure
earlier this year, picking up around 9 percent in London utility
company Thames Water.

Sovereign wealth funds do not face the same regulatory
issues in terms of capital requirements as pension funds and
insurers, which makes it easier for them to embark on such
projects, said JP Morgan’s Thomson.

Europe’s biggest insurer, Allianz, set up an infrastructure
debt team in July to tap growing interest from pension funds and
others, and hopes continuing EU talks about capital requirements
for insurers will facilitate such investments, said Deborah
Zurkow, CIO of Infrastructure Debt at AllianzGI.

“Regulators have become very aware of this shift and are
trying to adjust their regulations, she said.

Boosting pension funds’ direct lending may take longer in
countries such as Britain, where the government’s new “funding
for lending scheme” aims to boost loans to businesses, said
Graham Neilson, investment strategist at Cairn Capital.

“There’s more prevalence of investing in infrastructure
projects. It is more of an established asset class so it takes
less time to set up investment processes, whereas direct lending
has traditionally sat with banks,” Neilson said.

Umbrella body The National Association of Pension Funds is
leading a campaign to develop a framework that would rate fund
managers according to their work towards, for example, improving
governance at companies.

Pension funds own billions of pounds of assets which they
outsource to fund managers, which manage them on their behalf.

The framework is based on the “2020 Stewardship” report by a
group of six institutional investors including some of Britain’s
largest pension schemes such as the Universities Superannuation
Scheme and Railpen.

Talks with the NAPF, whose members represent some 800
billion pounds ($1.3 trillion) in assets, revolve around a
matrix system, grading asset managers based on how much or how
little they do on the governance front.

Although details are still being worked out, the framework
is likely to be publicly accessible online.

In the immediate aftermath of the financial crisis, pension
funds were accused of not demanding greater accountability -
through their fund managers – from companies they invest in,
especially banks.

But recent high-profile shareholder challenges – dubbed the
shareholder spring – and a raft of recent measures aimed at
improving governance standards such as the Stewardship Code and
the Kay Report on short termism in equity markets have signalled
a shift in attitudes towards improved corporate governance.

“The basic idea behind this initiative is to help asset
owners evaluate asset managers on different dimensions of
stewardship activity,” said Simon Wong, a partner at activist
investment firm Governance for Owners.

“Often, asset managers describe their activities in broad
terms and asset owners could benefit from such a framework so
that they are better equipped to then look how various asset
managers are doing on things ranging from voting, to engagement
to policy.”

At the moment, the only way pension funds can access what a
fund manager is doing on corporate governance is through
information provided on individual fund manager websites.

A spokesman from the NAPF added: “We believe it is important
that pension funds hold their managers to account for their
stewardship responsibilities and are looking at a number of ways
in which we can assist our members in that regard.”

Investment opportunities are increasing as cities in faster
growing markets expand and as governments in more developed
countries, short of cash, are forced to turn to the private
sector to fund upgrades to meet tougher environmental standards.

Meanwhile, investors such as pension funds want alternatives
to rock-bottom bond yields and volatile equity markets.

“There are opportunities in the water space that haven’t
been seen for decades now that governments have run out of
money,” said Zurich-based investor Martin Kloeck, whose Signina
Capital recently launched a water fund.

The global business, including drinking and waste water, is
thought to be worth about $450 billion a year and is growing at
up to 6 percent annually, according to Citigroup.

The assets of funds focused on water and specialist water
funds nearly doubled from just over $12 billion in 2010 to
nearly $24 billion in 2011, according to data from Lipper, a
Thomson Reuters service. That could reach $50 billion by 2015,
industry analysts believe.

Growing urban populations and a lack of government money to
upgrade infrastructure are increasing the need for private
sector investment, said Hans-Peter Portner, who runs Swiss bank
Pictet’s $2.9 billion water fund, the world’s largest.

“These drivers are solid as rock,” he said.

PRIVATE MONEY

Private sector investment is likely to account for 30
percent of investment in drinking water and waste water by 2016
compared to 19 percent now, according to the independent Global
Water Fund consultancy.

Long term predictions have yet to be borne out that climate
change and swelling cities could mean water takes off as a
commodity investment to rival oil, but investing in such a basic
need has an appeal at a time of global uncertainty.

Morningstar data show the top water-focused funds have
returned over 10 percent year-to-date against 6.4 percent for
the MSCI World Index. The iShares global water Exchange Traded
Fund has returned 17.6 percent.

Many funds invest in water-related stocks, such as treament
companies, meter makers and utilities.

“Despite a compelling long term growth case, global water
companies trade at discounts on earnings and cash flow and
provide a better dividend yield than the broad equity market,”
said Patrick Armstrong, chief investment officer at Armstrong
Investment Managers.

Two of the world’s largest water companies, Veolia
Environnement and Suez Environnement Co.,
offer dividend yields of 8.4 percent and 7.7 percent
respectively.

Debt financing and more complex deals are also options.

Kloeck’s Signina Capital, which recently launched a $450
million fund, this year closed a deal involving the City of
Ottawa in a contract that pays an annual eight percent.

“There are plenty of deals that we consider sweet spots,”
said Kloeck, eyeing those in the $20-$100 million range.

Even bigger returns – and growth rates of up to 20 percent a
year – could come from some emerging market sectors, such as
Chinese water companies and those dealing with desalination,
said Ian Simm of environment-focused Impax Asset Management. It
hopes to double the 220 million pounds ($357 million) of water
assets it has under management within four years.

LIQUIDITY AMONG CONCERNS

Not everyone is as bullish.

Schroders invests in water companies through its climate
change fund, but has no dedicated water fund.

“There are few large stocks like utility companies and then
a long tail of specialist smaller companies,” said Richard
Strathers, an equity analyst at Schroders. “The liquidity issue
would also be a concern.”

Politics is another worry for long term investments in a
sector which carries risks of expropriation and where it can be
hard to pass on price increases for such an essential service.

“We expect more growth in waste water as this market segment
is less politically charged and offers higher margins,” Pictet’s
Portner said.

Britain’s water companies offer exactly the sort of
stability and clear regulation that investors are seeking and
the number of deals shows the growing appetite for the sector.

China Investment Corporation and the BT Pension Scheme both
picked up stakes in Thames Water this year, while Canadian
pension funds CDPQ and CPPIB have acquired stakes in South East
Water and Anglian Water respectively. Fund manager M&G and
Morgan Stanley bought a 90 percent stake in French water firm
Veolia’s British business.

Another advantage of water was that its performance was not
linked as closely to overall economic growth as other
infrastructure investments, noted Tony Rocker, partner at
consultancy KPMG’s infrastructure unit.

“During the financial crisis of 2006-2009, it was the GDP
linked infrastructure assets that didn’t perform as well as
expected,” he said. “Water did exactly what it said on the tin.”

Research firm Preqin said that some $14 billion was raised by funds holding an interim closing during the quarter, an increase of 33 percent over the previous quarter.

An interim close is held by funds at any point during the fund raising process, allowing them to invest the money raised up until then in existing infrastructure projects such as schools, roads and airports.

“Investor appetite for infrastructure funds remains strong (and) this is shown by the healthy amount of capital raised by funds holding either a final or interim close in Q3 2012, and this looks set to continue in the coming year,” Elliot Bradbrook, manager of infrastructure data at Preqin.

However, funds holding a final close, that is, reaching their ultimate target for capital, nearly halved with six unlisted infrastructure funds raising $2.7 billion, compared with 11 funds raising a total $5.2 billion in the previous quarter.

Bradbrook noted this apparent discrepancy arose because while investors were making investments in infrastructure funds, they were now taking a lot longer on their due diligence checks, making the entire fund-raising process that much more protracted.

“Funds are able to raise money but it is taking them longer to raise their targeted amount and this is why we are seeing more interim closes and fewer final closes,” said Bradbrook.

“Before the financial crisis it could have taken just 12 months to launch and close a fund but now it can take up to 24 months for the whole process,” he added.

142 unlisted infrastructure funds are currently in market, targeting $91.6 billion in investor capital, Preqin said.

Some 51 percent of these funds have held at least one interim close, having raised an aggregate $29 billion of their overall targets.

Global Infrastructure Partners II remains the largest infrastructure fund currently in market, holding its third close of $7.5 billion in July 2012, Preqin said.

(Editing by Greg Mahlich)

Research firm Preqin said that some $14 billion was raised by funds holding an interim closing during the quarter, an increase of 33 percent over the previous quarter.

An interim close is held by funds at any point during the fund raising process, allowing them to invest the money raised up until then in existing infrastructure projects such as schools, roads and airports.

“Investor appetite for infrastructure funds remains strong (and) this is shown by the healthy amount of capital raised by funds holding either a final or interim close in Q3 2012, and this looks set to continue in the coming year,” Elliot Bradbrook, manager of infrastructure data at Preqin.

However, funds holding a final close, that is, reaching their ultimate target for capital, nearly halved with six unlisted infrastructure funds raising $2.7 billion, compared with 11 funds raising a total $5.2 billion in the previous quarter.

Bradbrook noted this apparent discrepancy arose because while investors were making investments in infrastructure funds, they were now taking a lot longer on their due diligence checks, making the entire fund-raising process that much more protracted.

“Funds are able to raise money but it is taking them longer to raise their targeted amount and this is why we are seeing more interim closes and fewer final closes,” said Bradbrook.

“Before the financial crisis it could have taken just 12 months to launch and close a fund but now it can take up to 24 months for the whole process,” he added.

142 unlisted infrastructure funds are currently in market, targeting $91.6 billion in investor capital, Preqin said.

Some 51 percent of these funds have held at least one interim close, having raised an aggregate $29 billion of their overall targets.

Global Infrastructure Partners II remains the largest infrastructure fund currently in market, holding its third close of $7.5 billion in July 2012, Preqin said.

(Editing by Greg Mahlich)

Many cash-rich funds are now preparing to spend the rest of
2012 on the sidelines after the expected fire sale on everything
from state-controlled airports to electricity grids failed to
materialise.

Now that the European Central Bank has pledged unlimited
support to struggling states in the sovereign bond market,
investors fear governments will have little incentive to adjust
historic book values for quick disposals, and a long period of
market inactivity beckons.

“The reason why these governments are not selling is that
they think prices will be too low, and they just don’t want to
sell at this point in time. It’s the last thing they would want
to do,” said Tony Rocker, a partner at infrastructure investment
transaction services at consultancy firm KPMG.

“They would not get the value they would have got 3-4 years
ago,” he said.

Even solid, blue-chip assets in southern European states
have failed to find buyers at targeted price levels.

Late last year, Spain pulled plans to sell two of its
airports in Madrid and Barcelona, while Ireland
and Greece, which have drawn up long shopping lists of assets
for privatisation, have yet to sell any of their businesses.

Greece was hoping to dispose of about 100 assets this year -
including natural gas company DEPA, gas grid operator DESFA,
Hellenic Petroleum and betting firm OPAP – in the hope of
raising about 3.2 billion euros ($4.02 billion).

Athens has now said it will only be able to complete the
sale of its state lottery firm and a building in
Athens..

Ireland, meanwhile, has been trying to sell its ports,
airports, electricity and gas distribution businesses for more
than 18 months.

“For some of these countries where there is uncertainty and
increased country risk, this is not the best market in which to
sell off state-owned assets and achieve the best price,” said
Marcus Ayre, head of infrastructure transactions for Europe at
fund manager First State Investments.

“So sometimes, it is difficult in some of these economies to
match vendors’ expectations when they are looking to sell
things,” he added.

PRICING THE RISK

Research firm Preqin said fund managers had carried out 30
infrastructure deals this year in “safe zone” Britain, compared
to 36 in 2011. But in Spain, only eight similar deals had taken
place in the year-to-date against 15 in 2011. Italy had only
wrapped up one deal so far in 2012, compared to 16 in 2011, it
added.

The central problem, said investors, was agreeing on the
right price for assets coming out of high-risk countries hit by
the debt crisis.

“These big ticket assets are difficult for the broader base
of institutional investors to price – especially in the case of
assets that have some level of government support,” said Rob
Gregor, managing partner at Balfour Beatty Infrastructure
Partners.

Daniel Wong, head of infrastructure and utilities for
Macquarie Capital, said most investors would only deal if
returns topped what governments were paying on their bonds.

“Once the government cost of borrowing breaks away and
starts to head to 6-7 percent and you add the premium on top of
that, most transactions cannot trade because there’s too much of
a pricing mismatch,” he added.

Reported loss after tax fell to 4.6 million pounds in the
first half of 2012, compared to 18.9 million pounds in the same
period last year.

“While markets have been, and are likely to remain
challenging for some time, we have made good progress in
positioning the group for the future,” executive chairman Edward
Bramson said in a statement.

The eurozone debt crisis and an economic slowdown have
dented investors’ appetite for risk, putting pressure on fund
managers’ revenues.

Total assets under management fell to 98.2 billion pounds,
compared to 100.1 billion pounds in the previous year.

The lower than expected fall in assets was down to
investment gains of 4.5 billion pounds, which offset client
withdrawals of 4.7 billion pounds. However, forex movements of
1.6 billion pounds resulted in the relatively small decline.

Insurance portfolio assets declined by 1.8 billion during
the first half. However, the firm said that Friends Life had
also notified its intention to withdraw a further 2.8 billion
pounds.

F&C is trying to refocus its business on institutional
clients, part of a strategic review pursued by Edward Bramson,
the activist investor who became chairman after a boardroom coup
last year.

The firm said new institional mandates won during the
period, but yet to activate, were 1.9 billion pounds, compared
to nil at the end of 2011.

In the second part of the review outlined in May, the fund
house said it planned to extend its range of investment trusts
and continue cost-cutting measures. Operating cost savings rose
by 3 million pounds to 48.8 million pounds over this period.

Broker Jefferies which put a ‘Buy’ rating on the firm said
in a note: “The achievement of the savings (bigger and sooner
than expected) is the true story.”

The firm also announced an unchanged interim dividend of 1
penny per share.

At 0800 GMT, F&C shares were down 2.8 percent to 85.5 pence.

Jefferies analyst Jason Streets said the lower shares were
due to “natural profit-taking” after rising from 65 pence to 88
pence in the past 2 months.

Last week, UK fund manager Aberdeen Asset Management
reported a slowdown in client inflows, while emerging
markets-focused manager Ashmore Group reported a loss
of about a fifth of its equity assets in the three months to
end-June earlier this month.

“2012 is a transitional year, during which F&C is
implementing new business strategies, re-sizing its expense
base, and beginning to improve its capital position,” Bramson
said.

The Conservative-led ruling coalition plans to inject as
much as 20 billion pounds of pension fund money into tired
British infrastructure through vehicles like the Pension
Infrastructure Platform (PIP), to support the ailing economy.

Joanne Segars, CEO of umbrella body the National Association
of Pension Funds (NAPF), which backs the project, told Reuters
PIP was on course for an early 2013 launch despite worries the
vehicle would fail to attract the required number of investors.

“We are close to getting our pool of founding members. A
good number of pension funds have signed up,” Segars said,
declining to confirm an exact number.

The fund is initially seeking to raise up to 2 billion
pounds from 10-12 pension fund investors, with leverage taking
the total investment to between 3 billion and 4 billion pounds.

Only the Strathclyde Pension Fund, has publicly signed up to
the scheme so far, but others including the London Pension Fund
Authority (LPFA), which has assets of around 4.2 billion pounds,
and the 5 billion pound Merseyside Pension Fund, told Reuters
they were considering participation.

The infrastructure fund will invest in brownfield projects
– assets that are already built and earning income — or
projects where the government will take on some of the
construction risk with aim of achieving returns of 2-5 percent
above inflation.

Segars said the government’s announcement last week of
offering guarantees on big infrastructure projects would give
pension funds “more confidence” to invest. The LPFA said it
wanted more detail on those guarantees and clarity on how many
other pension funds were signing up before making a decision.

UK pension funds allocate only 2 percent of total assets to
infrastructure investments, but LPFA Chief Executive Mike Taylor
said interest in the sector is growing.

“The reason for that is the newer types of of infrastructure
funds are not so much the private equity lookalikes that we had
when we first started investing in infrastructure, but they are
more geared to long-term, stable, inflation-linked cash flows
which are a good match to our liabilities,” he said.

The UK’s second largest scheme, the 32 billion pound
Universities Superannuation Scheme (USS), which already invests
close to 1 billion pounds directly in infrastructure said it was
interested in working alongside the PIP as a partner in deals.

Mike Powell, head of alternatives at USS, said: “In the UK,
there are very few funds that we could team up with for
transactions. If the PIP was successful, it would be an obvious
partner for us to do deals in the UK.”