AMP Capital targets $1bn for infrastructure debt fund
Australia fund house AMP Capital has raised $305 million for its second infrastructure debt fund, and hopes to achieve a final close of $1 billion by early next year.
Most of the investors in the AMP Capital Infrastructure Debt Fund II (IDF II) are Japanese insurers and pension funds, although the asset manager has received an allocation from one of the biggest insurers in South Korea for the second fund, as well as from Chinese insurers and pensions.
Two-thirds of investors across both of its infrastructure debt funds are Asia-based, with the rise in regional interest sparked by the low-yield environment, says Anthony Fasso, international CEO and head of global clients for AMP Capital.
“Bond yields are at record lows, so many [pensions and insurers] have a funding gap between what their assets are earning and what they need to pay out to members,” he adds.
As infrastructure debt offers potentially high returns and quick payouts, it is a perfect fit for asset owners’ portfolios, Fasso says. Investors, Japanese pensions in particular, are “getting ahead of the curve to look at high yield and long-term debt investments”.
All of the firm’s new Japanese pension investors are clients of Mitsubishi UFJ Trust and Banking Corporation.
The IDF II fund will, like its predecessor, invest in the subordinated debt of infrastructure assets of services including water, gas, electricity, transportation and communications across Europe, North America and Australia.
Its first investment was a £50 million ($77.8 million) subordinated loan to London’s Heathrow Airport at the end of July, and it plans to close on a number of other investments soon. The fund will invest in 10 to 15 companies in total.
Heathrow Airport offers a unique opportunity, as its revenue streams – including landing charges by airlines, shop rentals, income from car parks, advertising, catering, aircraft maintenance, and baggage claims, to name a few – are varied.
In addition to having a strong and consistent regulatory environment in the UK, Fasso says, it is extremely unlikely that Heathrow will face any competition in the near future. “No one is going to build an airport down the road,” he says.
AMP Capital’s eight-strong infrastructure investment team is spread across Sydney, London and New York. Andrew Jones, global head of infrastructure debt, oversees the team. Previously based in London, he recently moved back to Sydney.
The firm has six sales staff in Japan, two in Hong Kong and two in China, and does not have any plans to add to the sales team.