U.K. Wealth Fund to Target Private Equity, Infrastructure Investment

London Mayor Boris Johnson’s fledgling British sovereign-wealth fund plans to combine local public pension funds and invest billions of pounds in private equity and infrastructure projects.

The plan to develop a so-called citizens’ wealth fund with more than $100 billion is being led by Edmund Truell, a private equity investor and chairman of the London Pensions Fund Authority.

The mayor on Friday appointed Mr. Truell as his adviser for pensions and investments, with a mandate to expand partnerships that he developed between the London-based pension fund and two funds in northern England.

 Mr. Truell said in an interview that he recommends pension funds sell their government bondholdings and invest as much as half their money in higher yielding private equity, housing and infrastructure assets.

The goal of the new wealth fund is to save costs, improve returns and provide funding for construction of U.K. infrastructure, he said. “We would have our own homegrown sovereign-wealth fund,” Mr. Truell said.

 “We want to be a national entity. We don’t believe that managing pensions should be a local affair.”

The London Pensions Fund Authority and the Greater Manchester Pension Fund joined forces in January to create a £500 million ($780 million) infrastructure fund.

In December, the London fund agreed a separate £10 billion partnership with the Lancashire County Pension Fund. British government pension funds are fragmented along geographical lines and lack the scale of funds such as the Canada Pension Plan or PGGM in the Netherlands.

Both of those funds are able to directly acquire stakes in large companies and invest in major infrastructure projects.

 Mr. Truell said he has asked executives at funds in Canada and the Netherlands to join an advisory board. In July, U.K. Chancellor George Osborne called for pension funds to make savings or pool their investments.

Mr. Truell said that the national policy provided support for his initiative. Mr. Johnson’s term as London mayor ends in 2016.

He was elected a member of parliament earlier this year. Mr. Truell said he expected the project to build a sovereign-wealth fund to continue regardless of who succeeds Mr. Johnson as mayor of the U.K. capital.

 “I believe any London mayor will face the same challenges Boris faces,” he said. “London itself needs a vast amount of spend on its infrastructure.”

wsj.com