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Private & Confidential Pensions Investment in Infrastructure 11 April 2013Pensions Investment in InfrastructureRobert Gard...
Private & Confidential Pensions Investment in Infrastructure 11 April 2013 2Source: Aon Hewitt Risk TrackerWe live in unce...
Private & Confidential Pensions Investment in Infrastructure 11 April 2013 3A “Flight Plan” to repair the deficit and impr...
Private & Confidential Pensions Investment in Infrastructure 11 April 2013Why invest in infrastructure?44Private Finance I...
Private & Confidential Pensions Investment in Infrastructure 11 April 2013How is infrastructure attractive to long term in...
Private & Confidential Pensions Investment in Infrastructure 11 April 20136A Few Examples of Pension Funds and Infrastruct...
Private & Confidential Pensions Investment in Infrastructure 11 April 20137Image source: Genesis Housing AssociationGenesi...
Private & Confidential Pensions Investment in Infrastructure 11 April 20138Image source: Cambridge WaterCambridge WaterEqu...
Private & Confidential Pensions Investment in Infrastructure 11 April 20139Aviva REaLM (on behalf of Aviva Staff Pension S...
Private & Confidential Pensions Investment in Infrastructure 11 April 201310M&G InvestmentsSocial Housing• On behalf of a ...
Private & Confidential Pensions Investment in Infrastructure 11 April 2013Accessing Infrastructure11l Directly•Pension fun...
Private & Confidential Pensions Investment in Infrastructure 11 April 201313-15 Mallow Street London EC1Y 8RD Telephone : ...
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Pensions Investment in Infrastructure

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Transcript of "Pensions Investment in Infrastructure"

  1. 1. Private & Confidential Pensions Investment in Infrastructure 11 April 2013Pensions Investment in InfrastructureRobert GardnerCo-CEO of Redington1
  2. 2. Private & Confidential Pensions Investment in Infrastructure 11 April 2013 2Source: Aon Hewitt Risk TrackerWe live in uncertain times...Source: Bloomberg, Redington-100-500501001500100200300400500600700£bn£bnDeficit (RHS) (£ bn) Assets (LHS) Liabilities (LHS)-1-0.500.511.52%Pension funds continue to face a challenging economic environment30-Year Gilt Real Yield FTSE 100 Company Pension Assets and Liabilities
  3. 3. Private & Confidential Pensions Investment in Infrastructure 11 April 2013 3A “Flight Plan” to repair the deficit and improve member security...2012 2013 2014 2015 2016 2017 2018 2019 2020GBPMillionsLiabilities Path Actual Liabilities Assets Path Actual AssetsContributions & Asset ReturnsLiabilities BasisTime Horizon
  4. 4. Private & Confidential Pensions Investment in Infrastructure 11 April 2013Why invest in infrastructure?44Private Finance Initiatives Social Infrastructure ProjectsPrivate InfrastructureAttractive risk/return profile Liability-matching cash flows Diversification benefits1 2 3Infrastructure assets can provide pension funds with:
  5. 5. Private & Confidential Pensions Investment in Infrastructure 11 April 2013How is infrastructure attractive to long term investors – both debt and equity?5• First call on cashflows (i.e. secured)• Traditionally dominated by banks• Illiquidity premium• Stable, secure, long-term cashflows• Potential inflation-linkageInfrastructure Debt Infrastructure Equity• Call on free cashflows– a leveraged exposure.• Similar to private equity (with comparable fees)• Refinancing risk• Equity valuation more volatile
  6. 6. Private & Confidential Pensions Investment in Infrastructure 11 April 20136A Few Examples of Pension Funds and Infrastructure...Lessons learnedInflation-Linked Debt Equity Sale & Leaseback Social Housing
  7. 7. Private & Confidential Pensions Investment in Infrastructure 11 April 20137Image source: Genesis Housing AssociationGenesis Housing AssociationInflation-Linked Debt• Low-cost rental housing provided for disadvantagedpeople in need of housing.• Housing Associations have traditionally been ableto borrow long-term funding at very low marginsfrom their relationship banks, however post-creditcrunch, the funding landscape in the sector hasopened up.• Offers long-dated, inflation-linked cashflows fromsecured borrowers (i.e. housing associations) withquasi-government guarantee.
  8. 8. Private & Confidential Pensions Investment in Infrastructure 11 April 20138Image source: Cambridge WaterCambridge WaterEquity• Bought by HSBC in August 2011 (for warehousing)for £74m• Provides water for 300,000 people inCambridgeshire.• No external debt bar revolving credit facility.
  9. 9. Private & Confidential Pensions Investment in Infrastructure 11 April 20139Aviva REaLM (on behalf of Aviva Staff Pension Scheme) and Derwent LivingSale & Leaseback• We advised the Aviva Staff Pension Scheme on itsReturn Enhancing and Liability Matching (ReALM®)strategy to fund the transfer of 839 properties fromHome Group to East Midlands housing providerDerwent Living.Image source: Aviva Investors
  10. 10. Private & Confidential Pensions Investment in Infrastructure 11 April 201310M&G InvestmentsSocial Housing• On behalf of a client who was interested in oursuggestion to invest in social housing, we initiateddiscussions with M&G to ascertain whether theycould manage the investment.• These discussions led to M&G establishing itsSocial Housing Debt Fund in late 2011.Image source: Financial News
  11. 11. Private & Confidential Pensions Investment in Infrastructure 11 April 2013Accessing Infrastructure11l Directly•Pension funds buy infrastructuredebt directly from issuers.•This requires significantexpertise and resources (i.e. In-house team).Via a Dedicated Platform•Enables pooling of assets withother pension funds.•Examples: Pension InfrastructurePlatform (supported by theGovernment).Via an Asset Manager•We have met with and researcheda wide range of providers in thisspace, covering UK and Europeaninfrastructure debt.
  12. 12. Private & Confidential Pensions Investment in Infrastructure 11 April 201313-15 Mallow Street London EC1Y 8RD Telephone : +44 (0) 20 7250 3331 www.redington.co.ukContactsRobert GardnerCo-CEO, FounderDirect Line: 020 7250 3331robert.gardnerr@redington.co.uk12DisclaimerThe information herein was obtained from varioussources. We do not guarantee every aspect of itsaccuracy. The information is for your privateinformation and is for discussion purposes only. Avariety of market factors and assumptions mayaffect this analysis, and this analysis does notreflect all possible loss scenarios. There is nocertainty that the parameters and assumptionsused in this analysis can be duplicated with actualtrades. Any historical exchange rates, interestrates or other reference rates or prices whichappear above are not necessarily indicative offuture exchange rates, interest rates, or otherreference rates or prices. Neither the information,recommendations or opinions expressed hereinconstitutes an offer to buy or sell any securities,futures, options, or investment products on yourbehalf. Unless otherwise stated, any pricinginformation in this message is indicative only, issubject to change and is not an offer to transact.Where relevant, the price quoted is exclusive of taxand delivery costs. Any reference to the terms ofexecuted transactions should be treated aspreliminary and subject to further due diligence.Redington Limited is an investment consultantcompany regulated by the Financial ServicesAuthority. The company does not advise on allimplications of the transactions described herein.This information is for discussion purposes andprior to undertaking any trade, you should alsodiscuss with your professional, tax, accounting and/ or other relevant advisers how such particulartrade(s) affect you. All analysis (whether in respectof tax, accounting, law or of any other nature),should be treated as illustrative only and not reliedupon as accurate©Redington Limited 2012. All rights reserved.http://twitter.com/robertjgardnerhttp://uk.linkedin.com/in/robertjgardner
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