Pension plans launch $20 billion infrastructure fund

Thu Apr 26, 2012 6:16pm EDT
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By Greg Roumeliotis

(Reuters) - One of Canada's largest pension plans teamed up on Thursday with Japan's pension funds and some of its major conglomerates to help raise $20 billion for the world's largest infrastructure fund to invest in assets such as roads and airports.

While a handful of the world's biggest pension funds have the capacity to lead their own investments in infrastructure assets, the initiative represents an unprecedented effort to cut out asset managers as middle men in infrastructure investment.

Ontario Municipal Employees Retirement System (OMERS) said on Thursday it had committed a total of $7.5 billion together with Japan's Pension Fund Association and a consortium led by Mitsubishi Corporation, Japan's largest trading house, toward the new fund.

Infrastructure funds have traditionally been sponsored by investment banks, private equity firms and independent asset managers. If successful, the new fund could have major implications for the infrastructure asset management industry.

Much of the world's infrastructure is struggling to meet the needs of a growing and aging population. The Organization for Economic Co-operation and Development estimates $53 trillion of investment, equivalent to an annual 2.5 percent of global gross domestic product, will be needed to meet demand over the coming decades.

Dubbed Global Strategic Investment Alliance (GSIA), the new fund will invest in assets such as railways, ports and gas pipelines that have a value of over $2 billion each and are located primarily in North America and Europe.

The initiative is led by OMERS, which administers the pensions of 420,000 public sector employees in Ontario such as police officers, fire fighters and teachers, and has over $55.1 billion in net assets under management. It's infrastructure arm, Borealis, is a serial acquirer of infrastructure assets and its portfolio includes the Detroit River Rail Tunnel linking Michigan to Ontario and a high-speed rail line in Britain.

"Based upon the feedback in the market, we anticipate welcoming a number of other forward-thinking pension plans and other long-term institutional investors from around the world into the GSIA over the next 12 to 18 months," said Jacques Demers, strategic investments chief executive for OMERS, said in a statement.   Continued...