Pension fund ready to invest in construction

A fund established as part of George Osborne’s pledge to channel £20bn or more of institutional investment into major infrastructure projects is set to confirm its first investments in the construction phase of projects before the end of the year.

Michael Ryan, chief executive of Dalmore Capital Limited, which is administering the first fund established by the Pensions Infrastructure Platform (PIP), told Building this week the PIP would start to make investments in early stage projects in the fourth quarter of 2014.

The PIP, which is overseen by National Association of Pension Funds, is key to delivering the chancellor’s promise, made in November 2011, to drive £20bn of institutional investment into infrastructure projects.

However, progress has been sluggish and it did not start to make investments until February this year - more than a year later than originally expected.

Until now investments have been into completed projects that bring long-term returns and low risk.

But Ryan said:  “We hopefully have two [projects] lined up that would mean that we would invest £40m at the construction phase.”

Ryan added that these projects were social infrastructure projects - such as schools and hospitals - as has been the case with the £160m of assets the fund has invested in since February.

He said pension funds were not opposed to taking some construction risk on projects but that an appetite for investment in “riskier assets” would “take time to develop”.

Nelson Ogunshakin, industry chair of the National Infrastructure Plan Strategic Engagement Forum (NIPSEF), said the delay in getting pensions to invest in construction projects was because the UK pensions market was “highly fragmented”.

He added: “They [investors] struggle to have the capability in-house to assess construction projects.”

The news will come as a boost to the chancellor (pictured) ahead of the political party conference season, which begins next week with the Labour Party conference in Manchester, at which leader Ed Miliband is set to unveil plans to reform the housebuilding industry.

As Building went to press on Wednesday (17 September) Westminster was awaiting the outcome of the Scottish independence vote.

If the yes campaign wins, parliament is likely to be recalled, with the planned schedule of the party conferences thrown into chaos.