Industry Funds Management has won a US$500 million mandate from the California State Teachers’ Retirement System, the second-largest pension fund in the U.S.

IFM says US$300 million will be invested immediately and US$200 million will be invested in the next 18 months in regulated utilities, transport and other “cash-yielding, inflation-hedged infrastructure investments” in Australia, Europe and the U.S.

“We selected a well-established and well-respected partner,” says CalSTRS chief investment officer Chris Ailman in a statement.

“This decision is an opportunity for CalSTRS to partially hedge inflation risk by participating in the growing supply of high-quality infrastructure assets in developed economies, following the model of Australian pension funds, who have pioneered this sector and have leveraged the benefits of scale to deliver returns to their members,” he says.

IFM which has a $10 billion global infrastructure fund has an almost 17 year track record and a 40 member team. Its annual net returns are 12.2 per cent from August 1995 and December 2011. IFM takes stakes of between 15 per cent to 100 per cent in assets including toll roads and airports, sometimes with other investors.

CalSTRS’ assets under management are US$144.8 billion. It is the largest teacher pension fund in the U.S.

“We’re very pleased to be awarded the mandate as it reinforces the value of infrastructure to pension funds,” says Brett Himbury, IFM’s chief executive. “We are proud they have selected us among the group of potential global investors they could invest with.”

IFM is owned by 32 not-for-profit Australian superannuation funds. It manages about $31 billion across four asset classes: infrastructure, private equity, debt and equity.