Macquarie to launch UK’s first inflation-linked infrastructure debt fund

Macquarie is launching the first fund with an explicit focus on investing in UK inflation-linked infrastructure debt. The Macquarie Infrastructure Debt fund (UK Inflation Linked) is targeted at UK pension schemes seeking debt investments to match their long-dated inflation-linked liabilities.

By investing in less liquid assets and adopting a buy and hold strategy, the fund aims to achieve returns in excess of traditional liability matching strategies, supporting pension schemes to reduce their funding deficits. The fund will focus exclusively on investment grade debt to provide predictable asset cash flows suitable for pension scheme liability matching.

Access to UK infrastructure debt has previously only been available to a handful of large pension schemes with sufficient scale to appoint a fund manager to operate a separately managed account. This fund provides a vehicle for pension schemes of all sizes to access the asset class, with investments sourced and managed by the world’s largest infrastructure investor.

Macquarie has already secured a cornerstone UK corporate pension scheme investor who has committed £200 million to inflation-linked infrastructure debt via a separately managed account. This allocation will supplement the fund to provide a platform for meeting significant demand from infrastructure borrowers for inflation-linked debt.

Macquarie has also established an attractive pipeline of inflation-linked lending opportunities highlighting the real and immediate demand for indexed debt from UK infrastructure businesses.

James Wilson, CEO of Macquarie Infrastructure Debt Investment Solutions, said: “Infrastructure borrowers and pension schemes are natural partners which have been traditionally intermediated by banks through inflation swaps. However, since the financial crisis, borrowers have incurred significantly increased costs and risks when managing their inflation exposures using inflation swaps. Similarly, pension schemes suffer from considerable opportunity cost when they use large allocations to gilts or swaps to manage their interest rate and inflation exposures.

“Our fund is designed to bring these natural counterparties together, in a more direct and efficient way. This will deliver significant benefits to all parties including to the wider UK economy as well.”