California Pension Fund Buys Equity Stake in Gatwick Airport

The California Public Employees Retirement System, the largest U.S. public pension, is buying a 12.7 percent equity stake in London’s Gatwick airport as part of the fund’s burgeoning infrastructure-financing program.

Global Infrastructure Partners, a buyout firm that purchased Gatwick in 2009 from BAA Airports Ltd., has agreed to sell the 106-million-pound ($157 million) stake, according to statements from GIP and the pension fund in Sacramento, California. Gatwick, 28 miles south of London, is the U.K.’s second-busiest airport, serving 34 million passengers in 2008.

The $5.6 billion buyout fund, backed by Credit Suisse Group AG and General Electric Co., said in December it would sell stakes in Gatwick this year after purchasing the airport for 1.51 billion pounds. Calpers, as the $203.6 billion pension is known, has been adding assets to provide a hedge against inflation including commodities, timber, inflation-linked bonds and facilities such as power plants, airports and toll roads.

“We are looking for opportunities to invest directly in high-quality infrastructure assets,” George Diehr, head of the Calpers investment committee, said in the statement. “We see it as a good fit for our burgeoning infrastructure program.”

In March, the pension said it planned to allocate as much as $1.3 billion this year to its infrastructure-financing program, including putting as much as $900 million in funds that make related investments and another $400 million directly into such projects. Inflation-linked assets will eventually comprise as much as 5 percent of the pension fund’s holdings.

Airport Sale

Gatwick was offered for sale last year as Britain’s Competition Commission pondered a breakup of BAA Airports, owned by Spanish builder Ferrovial SA, to reduce the company’s dominance of the U.K. market. In February, GIP said it was selling stakes of Gatwick to the Abu Dhabi Investment Authority and to Korea’s National Pension Service. GIP said today it intends to maintain a controlling share of the airport.

“We are delighted that Calpers, one of the world’s largest and most sophisticated public pension funds, is investing alongside GIP in Gatwick,” Adebayo Ogunlesi, GIP’s chairman and managing partner, said in a separate statement. “We look forward to working with Calpers over the coming years as partners in what we believe will be an outstanding investment for all stakeholders.”

To contact the reporter on this story: Michael B. Marois in Sacramento at mmarois@bloomberg.net

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