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Calpers Buys Stake in Gatwick Airport

Courtesy of Leo Kolivakis

Via Pension Pulse.

Michael Marois reports in Bloomberg Businessweek, Calpers Buys Equity Stake in London’s Gatwick Airport:

The California Public Employees Retirement System, the largest U.S. public pension fund, is buying a 12.7 percent equity stake in London’s Gatwick airport, according to two people with direct knowledge of the sale.

 

Global Infrastructure Partners, a buyout firm that purchased Gatwick in 2009 from BAA Airports Ltd., will sell a 106-million-pound ($157 million) stake to the pension fund, according to the people, who spoke on condition of anonymity because they weren’t authorized to release the details. Gatwick is the U.K.’s second-largest airport and the busiest single- runway airport in the world.

 

New York-based GIP, which is backed by Credit Suisse Group AG and General Electric Co., said in December it intended to sell stakes in the airport this year after purchasing Gatwick for 1.51 billion pounds. Calpers, as the $203.6 billion fund is known, has been adding to a new asset class intended to hedge against inflation by investing in commodities, timberland, inflation-linked bonds and infrastructure such as power plants, airports and toll roads.

 

In March, the pension fund said it intended to allocate as much as $1.3 billion this year to its infrastructure financing program, including as much as $900 million in funds that invest in infrastructure assets and another $400 million directly into such projects. The inflation-linked asset class will eventually encompass as much as 5 percent of assets.

Airport Sale

 

The airport was offered for sale last year as Britain’s Competition Commission pondered a breakup of BAA to reduce the company’s dominance of the U.K. market. In February, GIP said it was selling stakes of Gatwick to the Abu Dhabi Investment Authority and to Korea’s National Pension Service.

 

Andrew McCallum, head of communications for Gatwick, referred questions about the sale to GIP. Jack Cowell, a spokesman for GIP in New York, didn’t immediately respond to a call seeking comment. Brad Pacheco, a spokesman for Calpers, declined to comment.

This might turn out to be a good deal for Calpers. Ontario Teachers’, who is a lot more experienced in infrastructure investments, recently increased its stake in Bristol International Airport, a sign of confidence in British airports.

Infrastructure is indeed a burgeoning asset class and more pension funds are looking to aggressively allocate to these investments. Unfortunately, few have the investment staff to fully understand the risks of infrastructure investments and how to properly structure these deals.

 


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