Should have posted this yesterday but work got in the way of blogging. Tsk! But it's exactly the sort of debate we ought to be having in the UK. Pension funds are putting an increasing slug into infrastructure if the NAPF's stats are to be believed, but is anyone trying to leverage that investment to ensure that good jobs are being created?
US union wants pension backing for roads
By Francesco Guerrera in New York
Published: February 25 2008 02:00 | Last updated: February 25 2008 02:00
The second-largest union federation in the US is putting pressure on state pension funds to invest part of their $2,000bn-worth of assets into domestic infrastructure such as roads and airports in an effort to keep them away from private equity groups and sovereign wealth funds.
The Service Employees International Union (SEIU), which has 1.5m members and is an influential powerbroker in the Democratic party, has floated a proposal to form an investment pool with contributions from state retirement systems.
The pool would be run by an outside manager and specialise in buying US infrastructure in competition with the many private equity groups and overseas buyers, such the Australian bank Macquarie, which have been investing in the fast-growing sector.
"It is a question of whether public pension could pool investments [so that] they would all own a piece of different infrastructure projects," Andy Stern, SEIU president told the Financial Times. "That way you don't have to put it in private hands, you keep it in public hands."
The plan, which was presented by Mr Stern to the Democratic Governors Association two months ago, is a further sign of the mounting US political backlash against private equity and sovereign funds.
As the US economy slows down, politicians of both sides are trying to allay the fears of an electorate worried about the effects of foreign investments and globalisation on domestic job creation.
Republican and Democratic presidential candidates including Senator Barack Obama, who has received the SEIU backing, have expressed concerns at the lack of transparency of sovereign wealth funds.
Last week, Bain Capital and its Chinese partner, Huawei Technologies, scrapped a $2.2bn takeover of 3Com, a computer networking company, saying that the Washington committee charged with vetting foreign investments would not approve it. Two years ago, lawmakers derailed a proposed takeover of five port terminals by Dubai Ports World because of alleged security concerns.
Mr Stern said that, although the plan was still in its early stages, some state governors including Jon Corzine, the former Goldman Sachs executive who is governor of New Jersey, had welcomed it in principle.
A spokesman for the state of New Jersey's Treasury department said the SEIU had been in touch about the project. "We are looking at a number of different options with regards to infrastructure, no final decision has been made," he added.
Infrastructure investments have been booming over the past few years in both emerging and developed markets. "During the past two years, the flood of money into infrastructure funds has been astonishing," wrote the management consultancy McKinsey in a report. "The world's 20 largest [funds] now have nearly $130bn under management, 77 per cent of it raised in 2006 and 2007."