By Muskan Arora
The growth of innovation technology and
government policy has led the $4.32B Seattle City Employees Retirement System to
consider emerging sectors within its infrastructure portfolio, in the current year.
The pension plan allocates 2.9% to its
infrastructure bucket, against a target of 5%, as of December 31, 2024. The target
allocation ranges from 2% to 8%.
Seattle is bullish towards middle market
infrastructure funds due to its increased opportunity in the market, better
exit opportunities and lower manager competition.
The recent meeting documents, presented by the
consultant NEPC, state that, “middle market companies in the US are outpacing
large caps in revenue growth.”
With an intention to grow the infrastructure portfolio, the plan has allocated up to $20M to Tiger Infrastructure Partners Fund IV.
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The fund is a continuation fund, with a focus on North America and Europe and will invest in communications, energy transition, and transportation sectors.
SCERS also committed up to $20M to
Nova Infrastructure Partners Fund II, a middle market fund focused on digital
communications, energy and energy transition, and transportation with
additional opportunities in waste and water services sectors.
While the opportunity set seems very
attractive, the consultant and staff continue to monitor challenges including pricing
pressure, risks with infrastructure funds resembling private equity and sectors
susceptible to scrutiny for environment environmental impacts or price gouging.
Within its infrastructure portfolio, the
plan finds communication, midstream and transportation sector extremely
attractive with a focus on investments in North America and Europe.
SCERS returned 8.7% net-of-fees for 2024,
outperforming the strategic policy benchmark by 0.4%.
Last year, the pension plan committed up to
$17.5M to GIP V, a global large-market infrastructure strategy and $20
million to Stonepeak Fund V, a North America-focused large-market
infrastructure strategy.
