People’s Pension is in the early stages of seeking managers for an allocation to UK and global property. The defined contribution fund will also soon announce two newly appointed infrastructure managers.  

Early last year, the master trust that now manages £40bn announced that it would allocate about 10 per cent of its growth pool assets to private markets by 2030, starting with infrastructure and property. It caveated this by saying that assets need to be available that meet its return requirements. 

The plan is now taking shape. “By the time we get to the end of this year, you're probably looking at a billion pounds [each] to four different managers across infrastructure and real estate,” deputy chief investment officer Phil Butler told mallowstreet.

The Mansion House signatory has already selected the infrastructure managers and expects to announce the managers “by the summer, to use that word loosely”, Butler said.  

Property is next on the list. The real assets team, under co-heads Marija Simpraga and Raymond Wright, will continue with the model it has used so far – a wide-ranging request for proposals to the market, followed by a multi-stage process of long and short lists. 

The goal is to find “a manager that we think aligns to our philosophy, can meet the requirements we have on a [responsible investment] lens, on a theme lens, putting in a mandate that works for particular return prospects that we like”, said Butler. 

The pension fund aims to build lasting partnerships with its managers. As with infrastructure and emerging markets, the number of managers will be limited, meaning ticket sizes tend to be large. For property, Butler expects to hire one or two managers initially, each handling about £1bn. 

The direct property portfolio to be built from scratch will be mixed, spread across both UK and global, as well as across different segments, and could even involve developing or repurposing properties.

“The yield in this space is quite nice and given our time horizon, [we will] probably [be] extending a little bit into that development space,” Butler said. “I think there's some real potential there if we can align with the right manager to deliver that.” 

This could mean transforming a retail block into a social space, redesigning shopping centres or creating housing out of brownfield sites, he explained, but added that such investments would be “very location specific”. 

The newly hired infrastructure managers will also need to deploy the capital they have just received. The pensions minister ‘pitched’ the government’s infrastructure pipeline to the assembled investors at this month’s Pensions UK Investment Conference. Butler thinks some of these are attractive, noting that investors discuss with the government what assets they are looking at. 

“One area where we've been concerned a bit is that all those managers are seeing the same deals,” he says. “The Canadians, Australians, are also looking at these assets. So the depth in that pipeline just needs to keep coming through.” 

While not all UK assets the government seeks funding for work for pension funds, “there are definitely assets there that we like the look of that meet the yield or return expectations that we want” says Butler. 

“Hopefully by the time that we're investing in the second half of the year for infrastructure, we'll be putting some of this money to work in some of the projects that Torsten Bell was mentioning,” he adds. 

The master trust is also reshaping its equity portfolio, having earlier this year funded a £3.6bn active emerging market equity mandate for which Robeco was appointed last year.