Special report: Trustees stick to “vanilla” option energy and utilities firms
Schemes are becoming more confident about investing in infrastructure. This year’s Future of Trusteeship survey, sponsored by Pension Insurance Corporation (PIC), found that almost a quarter (23.8%) of respondents had already invested in this asset class.
They still felt more comfortable investing in what PIC’s Jay Shah describes as “vanilla” options – almost half (48%) said they would allocate to utilities, and almost a quarter (22%) were interested in energy. “Utilities give security of income and dividends,” says trustee Alan Jennison.
Schemes typically invest in these through corporate bonds rather than directly, as PIC does.
“We’re actually investing in student accommodation, or solar parks, or whatever, as opposed to really just buying slightly lower risk corporate bonds,” says Shah.
The size of our pension scheme wouldn’t warrant it
Schemes which were not so keen to allocate to infrastructure generally cited size as the barrier. “The size of our pension scheme wouldn’t warrant it,” says trustee John Husband. “I suppose at some stage there will be funds launched which will unitise infrastructure, which would widen the market”.
I find it very difficult to get my head around what the fees are
“I’m not a big fan of infrastructure because it takes a long time to get in there, it’s enormously illiquid, and I find it very difficult to get my head around what the fees are,” adds Akzo Nobel trustee Richard Waterbury.
Again, unitising infrastructure could help get around these problems, but for the moment this asset class remains the domain of larger schemes.