Institutional Asset Manager Newsletter 12.07.24

No time to waste says UK government in search for investment in infrastructure

It didn’t take long for the new UK government to answer calls for more capital to support British business.
This week Chancellor Rachel Reeves announced a GBP7.3 billion National Wealth Fund (NWF) which brings together the UK Infrastructure Bank (UKIB) and the British Business Bank to provide a central point for investors to channel capital to the "new industries of the future".
Declaring there is "no time to waste", Reeves is keen to ensure that the billions of pounds available in pension funds makes its way towards delivering net zero and vital infrastructure projects. However, we aren’t allowed to say levelling up anymore after the slogan has been "firmly Tippex-ed out" from what is now the Ministry of Housing, Communities and Local Government.
The NWF has support from large institutional investors including Aviva and Legal & General and given the possibility for private companies to at manage at least some of the multi-billion-pound fund, such enthusiasm is no great surprise.
According to the National Wealth Fund Taskforce Report, much of the money will be run inhouse by individuals with "private sector investor expertise and market credibility to manage the fund". The report also notes that "pay constraints must be relaxed to enable the calibre of appointment required".
However, the Taskforce is also weighing up different options for outsourcing to fund managers. These include being managed by a public pension fund and the report refers to the Pension Protection Fund in addition to the local authority pension pools as example of institutions "that could have responsibility for management of a portion of NWF capital".
A second option on the table is appointing an existing private sector fund. The Taskforce says outsourcing the management of the fund to private investment funds would "leverage their strong brands and existing track records in the market". This could build on existing precedent for this model, for example the Charging Infrastructure Investment Fund, where specialist private equity fund Zouk Capital16 manages GBP200 million of initial investment on behalf of UKIB.
There is much still to be decided on the NWF’s structure, governance and investment mandate, but the Taskforce is clear that "operational independence is paramount".
This means balancing the government’s need to deploy capital to the projects it deems priorities, while building credibility and keeping the proposition attractive to investors.
Chancellor Reeve may have acted fast in announcing the new fund, but there is still a long way to go before it really gets going.

Gill Wadsworth, Editor, Institutional Asset Manager
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