UK Infrastructure Bank to move away from investing through fund managers – reports

The bank, which just surpassed its one year anniversary, has previously come under criticism for investing £100m in the Octopus Sustainable Infrastructure fund and £250m in NextEnergy Capital’s solar fund.

Last month, Lord Aamer Sarfraz, the prime minister’s trade envoy to Singapore, said that while he was sure the bank could play a “valuable role”, it should be doing “the difficult direct deals” rather than “outsource their responsibilities to third party fund managers, as once you invest in a fund you have very little influence over it”.

“The point of the bank is to address a market gap in infrastructure investing and it is not at all clear that it is doing that,” he stated.

Chief executive of the bank John Flint said yesterday in an interview with the Financial Times that “we absolutely do intend to make direct equity investments ourselves,” while defending the practice of investing in funds as “a legitimate technique”.

“We do not have the skills to make direct equity investments ourselves today, but we will resource for that. A year from now we will have the ability.”

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The bank has financed a range of projects through debt, such as £50m as a co-lender to broadband provider Fibrus and a £107m loan to the Tees Valley Combined Authority for its South Bank quay development. However, it is now looking to move into financing through equity.

Flint said there is sometimes a “philosophical aversion to third-party managers… but I want to keep an open mind about it. It is a great opportunity to deploy public money alongside private.”

“We will retain the option to use [them] where we think it makes sense,” he said. “We absolutely control the mandate, we decide what the objectives of the fund are, and we decide what sectors to go into.”

Yesterday, the bank launched a report that set out its strategic objectives, which include a focus on clean and renewable energy, as well as specific challenges such as increasing the number of charging points for electric vehicles.

The bank has £22bn to invest over the next five to eight years and aims to generate a return of between 2.5% to 4%.

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