OMERS, Japanese Partners Eye $20 Billion Infrastructure Fund

The pension plan representing municipal workers in Ontario has teamed up with two Japanese partners to launch a global investment fund.

April 27, 2012) — One of Canada’s largest pensions is joining forces with Japan’s pension schemes to launch a $20 billion infrastructure fund to invest in assets including railways, ports and gas pipelines located primarily in North America and Europe. 

The Ontario Municipal Employees Retirement System (OMERS) has revealed that it has committed $7.5 billion to the new infrastructure fund with Japan’s Pension Fund Association and a consortium led by Mitsubishi Corp., Japan’s largest trading house. Of the $7.5 billion, OMERS committed $5 billion to the fund, Japan’s Pension Fund Association has committed $1.25 billion, and Mitsubishi’s consortium has committed $1.25 billion. The fundraising goal of the newly dubbed Global Strategic Investment Alliance (GSIA) is $20 billion.

“We’re very pleased to be partnering with these sophisticated investors in pursuit of high-quality, large infrastructure investments that we can own over the long term,” said Jacques Demers, President and CEO of OMERS Strategic Investments. “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 thereby bringing significant additional (ie. billion dollar plus) commitments to the program.”

The initiative represents the immense influence among institutional investors in helping to meet the needs of a growing and aging population, translating to increasing demand for infrastructure investment worldwide. 

The popularity of infrastructure among institutional investors was highlighted in an August 2011 study by Keefe, Bruyette & Woods, which found that the hype over alternatives among institutional investors in the US is not expected to subside. The study by KBW followed another poll in early August 2011 by SEI — completed by 106 pension executives overseeing assets ranging in size from $25 million to over $1 billion — that revealed an increasing number of pension funds are using alternatives as funded status volatility continues to be a primary concern.

Last September, following President Barack Obama’s national infrastructure push detailed in his speech before Congress, the largest public pension fund in the US expressed its commitment to the asset class. The California Public Employees’ Retirement System (CalPERS) Board of Administration earmarked up to $800 million for investments in California infrastructure over the next three years. The scheme’s plan called for investments in both public and private infrastructure, including transportation, energy, natural resources, utilities, water, communications, and other social support services. “We remain committed to California’s future and the investment opportunities that run deep between our coastline, mountains and valleys,” said Rob Feckner, President of the CalPERS Board of Administration. “We are prepared to increase our investments in infrastructure with our first and foremost goal being on investment returns, and a secondary goal of supporting essential community services that are crucial to continued economic development, a safe environment, and healthy schools and communities.”  

Related article: Infrastructure for ­liability-driven ­investment.