The Northern Ireland Local Government Officers’ Superannuation Committee has pledged millions in infrastructure investment in the past 12 months, and is now turning to review opportunities in absolute return bonds and multi-asset credit.
Four per cent of European pension schemes currently have exposure to listed infrastructure, according to consultancy Mercer. Three per cent of schemes are invested in unlisted infrastructure.
A spokesperson for the committee confirmed that it committed €50m (£43.9m) to Dutch manager DIF’s Infrastructure V fund in December 2017. The scheme completed its entry into the fund in January.
The committee also approved €20m “in principle… for suitable co-investment opportunities with DIF V”, with the Lothian Pension Fund.
Last month, the DIF V fund acquired a majority stake in the A150 toll road in France. The fund took a 66.7 per cent stake in Albea SAS, a company that holds the concession to operate the road.
The scheme has also committed $50m (£38m) towards the KKR Infrastructure Fund III.
It now turns its attentions to the hiring of two absolute return bond managers and two MAC managers.
Absolute return bond funds have disappointed
Committee minutes from March provided an update on Nilgosc’s ongoing search for two absolute return bond managers, which the committee declined to comment on.
Amanda Burdge, principal investment consultant at Quantum Advisory, said that schemes can afford more protection to their portfolios with absolute return bond funds in a rising interest rate environment, “given their short duration”. This duration is typically under 10 years, she said.
The search may have well have come in good time. On Thursday, the Bank of England’s chief economist Andy Haldane shifted his previously dovish position and voted to raise interest rates.
The Monetary Policy Committee voted 6-3 to hold rates, with anticipation growing over a potential rate rise at its August meeting.
Burdge said the asset class has underperformed in recent years, but the tide may soon turn for investors.
“If you look back at the performance over the last five years or so, I think they have disappointed,” she said.
“With the market turning, they could potentially offer not just diversification benefits, but you may find that their portfolios begin to deliver returns for pension schemes,” she added.
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