Stephen Vineburg, First State’s global head of infrastructure investment, will move to London from Australia to establish a 12-strong team to manage the First State European Diversified Infrastructure Fund, due to roll out this month.
A Luxembourg-domiciled FCP-SIF, the fund is likely to have a “semi open-ended” structure which will lock up client capital for five years before allowing limited redemption, designed “to match the long-term attributes of infrastructure assets and the objectives of investors.”
“It seems funny that most of the investment structures in the space are closed-end limited partnership models brought across from the private equity world,” said Mr Vineburg. “For a lot of our Australian investors, if we go to the trouble of buying an airport and investing in it, they don’t want us to come back five years later and say, ‘We’ve sold that airport and here’s your money back with a premium.’ What we offer is continuing exposure to a pool of these assets, which
we think offers a pretty attractive long-term return, rather than a focus on super returns over the next couple of years.”
Mr Vineburg said that the firm would be looking for €1.5bn initially, before returning for up to €3-4bn over the next few years should sufficient opportunities arise to absorb the capital.
First State has been investing in infrastructure projects in Australia for 12 years and has $2bn (€1.5bn) under management in 15 different projects.
In recent years a small team has been working with partners to source opportunities in Europe: in 2006 it became the lead investor in the £2.3bn (€3.4bn) consortium bid for Anglian Water Group plc, which will be the foundation investment for the new fund.
“I’ve been struck by the fact that UK pension funds have conservative asset allocations,” said Mr Vineburg. “We’ve been through a bit of a journey with our pension fund clients in Australia, where it’s becoming more and more common to replace the fixed income type allocation, say, with infrastructure assets and cash for liquidity.
“I think the long-term pools of capital putting infrastructure in their portfolios is here to stay. Whether they do that as replacement for bonds or property, a liability-immuniser, an alpha strategy – people are still grappling with how they are thinking about it. But
fundamentally, when it comes time to retire it’s not a bad thing to realise that part of your money you need to live on is coming from a pool of airports, toll roads and pipelines, rather than lying awake every night worrying about whether the Dow is going to catch a cold.”
MS
