By Bernard H. Casey

Robin Harding argues that “pension funds need a radical rethink” (Opinion, January 6). But remember investing in infrastructure is nothing new for pension funds. I recall being at an event at the London School of Economics in September 2011 where Nick Clegg, then the deputy prime minister, proposed this as a way to get the economy moving without the need for additional public expenditure. I raised the example of Australian and Canadian funds with him — but also their shortcomings. They did not make initial (aka “green”) investments. They bought existing (aka “brown”) assets and used these to generate cash flows. Initiating projects was far too risky. Remember too what happened to the original Channel Tunnel investors.

The then National Association of Pension Funds (now the Pensions and Lifetime Savings Association) tried to set up a PIP (pensions infrastructure platform) for its members. Actual amounts invested have been small. The Universities Superannuation Scheme — one of the biggest investors in brown projects in the last decade — did not even participate.

Mandatory public pension funds have involved themselves in infrastructure. The Swedish public system, before the reforms of the end of the 1990s, collected more in contributions than it was paying out and built up a “reserve”. This was used to invest in infrastructure — a term then widely interpreted. Exactly what the returns were has always been difficult to calculate. But, as Mr Harding points out, we cannot even go back to the defined benefit world, let alone to state pensions.

Read more @Financial Times