The California Public Employees' Retirement System (CalPERS) plans to implement a $5 billion infrastructure investment programme by partnering with other investors active in the asset class, an executive at the $226.3 billion pension said at a conference Friday.
“If there’s one thing that we’ve recognised about our programme, it’s that we’re going to be building it by building partnerships. And I mean that quite broadly, with partners who are . . . fund managers and other of our peers in consortias,” Christine Yokan, portfolio manager on CalPERS’ infrastructure team, said during a presentation at the Infrastructure Investor: Europe forum in Berlin.
“We’re most importantly looking for partners who we can work with for a long period of time,” Yokan added. “We expect those to be relationships that will help us to build our programme. We’re looking for like-minded partners in the investments.”
If there's one thing that we've recognised about our programme, it's that we're going to be building it by building partnerships.
Yokan said those investments would include direct investments, where a pension takes an equity stake in an infrastructure asset rather than owning an interest in the asset via a fund manager.
“It really depends on aspects specific to the investment, the geography and also recognises our team capabilities and also resources,” Yokan said, adding: “So I think closer to home we consider it to be very realistic and that’s something that we’ll pursue. Outside of that area, we’re more likely to make sure we’re partnered in some way.”
Yokan discussed CalPERS’ purchase of its 12.7 percent equity stake in London’s Gatwick Airport as one example of an investment with a like-minded partner. CalPERS purchased the stake in June 2010 from Global Infrastructure Partners (GIP), a $5.64 billion infrastructure fund manager which bought the airport for £1.5 billion (€1.6 billion; $2.4 billion) in 2009.
Andrew Gillespie-Smith, a principal at GIP, said during an on-stage interview with Yokan the sale was part of a planned equity syndication for Gatwick Airport after the deal reached financial close in December 2009. Gillespie-Smith said GIP first offered the syndication to its existing limited partners; however, because their appetite for direct exposure to Gatwick was limited, GIP offered the equity to other institutional investors. These included the Abu Dhabi Investment Authority (15 percent), South Korea’s National Pension Service (12 percent), Australia’s Future Fund (17.2 percent) and CalPERS.
Yokan said the deal marked the first investment for CalPERS’ infrastructure group, which was created in 2008, hired its team in 2009 and is now building out its portfolio.
Attendees at past Infrastructure Investor: Europe forums have expressed doubt about public pensions’ ability to hire and retain the top talent necessary to invest in infrastructure directly. But Yokan said CalPERS was “fortunate” to be a large fund that has been capable of hiring an infrastructure team capable of doing direct deals.
“All of the senior team have direct experience,” she said.