Allianz Global Investors (AllianzGI) has announced a £175 million investment in a major Scottish road project on behalf of a UK pension fund client, Stanhope Pension Trust, the trustee for the Telent pension fund.
The fund manager is to acquire listed project bonds issued by the Scottish Roads Partnership, which will be used to fund the design, construction, operation and maintenance of roads forming part of the M8, M73 and M74 motorway improvement project in central Scotland. The infrastructure investment will also be funded by a term loan from the European Investment Bank and from shareholder funding. According to AllianzGI, the transaction is the first UK listed project bond to have a deferred settlement mechanism to mitigate negative carry.
Adrian Jones of the AllianzGI infrastructure debt team commented: “There have been a number of initiatives by the private and public sectors to encourage investment in new build UK infrastructure by institutional investors via listed project bonds. The UK pension trustee, Stanhope Pension Trust Ltd is one of an increasing number of third party investors, alongside Allianz group entities, electing to invest via the AllianzGI infrastructure debt platform to gain access to this asset class. We expect the experience gained in achieving this milestone to stimulate the participation of more institutional investors in UK infrastructure, to the benefit of both long-term investors and the broader UK economy.”
Infrastructure debt is seen as way for investors to earn a fixed income-type yield from an underlying real asset. The long maturities for infrastructure debt also match long-dated liabilities at pension funds.