Infrastructure asset manager IFM Investors has hired Dan Vanden Boom from Morgan Stanley Investment Management to develop the business, originate deals and manage relationships with asset consultants. He will start in May, based in the firm’s head office in Melbourne.
Vanden Boom’s title is director of business development and he takes over the Australian responsibilities of his boss Eddy Schipper, who moved to Tokyo in January to start the process of adding Asian pension funds to IFM’s client base.
Schipper says IFM chose Japan as its Asian launch pad over cities like Hong Kong and Singapore because of the depth and breadth of the existing pension funds market. “Japanese funds already have an understanding of infrastructure as an asset class and are familiar with open-ended fund structures.”
His initial plan is to promote IFM Investors’ infrastructure debt capabilities. “We are already fairly well known for our equity investments but most don’t realise that we are also one of the largest single investors in infrastructure bonds and loans,” says Schipper, adding that Asian investors will be offered units in existing funds, or in discretionary accounts.
“I am going direct to some of the biggest funds – a few of which have a specialist person dedicated to infrastructure – and via the asset consultants,” he adds.
As at December 31, the firm had A$50 billion ($45 billion) in assets under management across infrastructure, debt, equities and private capital. Some 40% of that comprises direct investments in infrastructure companies. The firm holds direct interests in 26 companies in Australia, North America and Europe, with 39 board seats.
IFM Investors does not own any infrastructure assets in Asia yet, but has private equity investments in the region.
Schipper, whose title is executive director of business development, says Vanden Boom was attracted to the firm’s dedicated infrastructure focus and its unique ownership structure.
IFM Investors is owned by 30 of Australia’s largest not-for-profit superannuation funds, including AustralianSuper, Auscoal, Cbus, Hesta, HostPlus, Maritime Super and Media Super. When the firm was first launched 20 years ago, these funds were also its primary investors, but IFM now manages money for more than 150 institutional clients.
“Our most recent new investors hail from the US, where we have been actively marketing our global infrastructure fund for the past three years,” says Schipper. “Four out of five of the largest US public pension funds are already invested with us.”
The take-up in Europe has been slower, due a lack of familiarity with open-ended fund structures. Says Schipper: “Momentum is building in Europe, though it has taken us some time to educate the market and get them to consider something other than a closed-ended fund model.”
As a director in charge of client servicing in Australia, Vanden Boom will inherit a collection of mature relationships. “Some of our Australian investors have been with us for two decades,” says Schipper. “Many of them have become so comfortable with the asset class that they have made a separate allocation to infrastructure within their model portfolios.”
In fact, Australia is so far along the curve that IFM Investors is increasingly entering co-investment deals with its super fund clients.
Last year it was involved in the New South Wales government’s sale of two mega seaports worth a A$5.07 billion, leading a consortium consisting of AustralianSuper, Cbus, Hesta, HostPlus and Tawreed Investments, a wholly owned subsidiary of the Abu Dhabi Investment Authority.
The consortium won the competitive bid and took over the 99-year leases on Port Kembla and Port Botany in June.
In an interview with AsianInvestor magazine last year, Kyle Mangini, who is global head of infrastructure for IFM, predicted that Australia’s not-for-profit superannuation funds would invest more than A$15 billion in infrastructure assets over the next five years, provided governments continued to promote privatisation.
“The limited number of available assets is the biggest obstacle to further involvement by pension funds,” he said at the time.
Mangini talked about the scourge of overpriced deals, and attributed the poor performance of some PPP road projects in Australia to “a lack of alignment” when they were put together.
“Many of these deals were packaged by sponsors who paid themselves large fees and then sold the asset on to longer-term investors,” he told AsianInvestor. “The sponsors had an incentive to win the deal, rather than to put together a long-term investment that would provide appropriate risk-adjusted returns.”
He said past PPP projects needed to be scrutinised to avoid a repeat of mistakes.
Research conducted in 2013 by ISN, an umbrella organisation representing 35 of the country’s largest industry superannuation funds, found that $100 million invested in infrastructure 15 years ago would be worth A$562 million now. That is 2.5 times more than an investment in cash or non-Australian equities would have yielded.