Indonesia Investment Authority seeks to grow co-investment commitments
A version of this article was first published on FinanceAsia.
The Indonesia Investment Authority (INA) is forging ahead with plans to raise foreign capital for co-investments into strategic national projects.
Since February, it has been in talks with more than 100 investors from around the world, chief investment officer Stefanus Ade Hadiwidjaja said in his first interview with media since joining the sovereign wealth fund (SWF) in March.
Last week, INA signed a partnership with government-supported, growth-focused investment fund, the Abu Dhabi Growth Fund (ADG) on the back of the United Arab Emirates’ (UAE) earlier $10 billion pledge to INA, announced in March.
The UAE government is the largest anchor investor in INA to date, with the Abu Dhabi Investment Authority (ADIA) also agreeing to back a proposed $3.75 billion infrastructure investment platform which targets opportunities in Indonesia’s toll road sector, alongside other institutional investors, Caisse de dépôt et placement du Québec (CDPQ) and APG Asset Management.
“We have another investment partnership with ADIA for investment in other deals and potentially soon with other sovereign wealth funds in the UAE, such as [Abu Dhabi state holding firm] ADQ, ADG, Mubadala, and Singapore’s GIC,” Hadiwidjaja said.
INVESTMENT STRATEGY
Hadiwidjaja believes that there is scope for its co-investment capital commitments to increase, as the INA team works to cultivate a track record and establish investor confidence among its foreign partners.
“We are offering investors the chance to participate in the fast-growing market that is Indonesia. INA has access to many excellent deals and investment opportunities. We understand the assets very well, we have local insights, we can negotiate with the relevant stakeholders, and we are a good partner in conducting due diligence on the assets so that we make the right investment decision,” he said.
INA is seeded with $5 billion in capital from the Indonesian government and seeks to attract up to $15 billion in additional foreign capital from international institutional investors.
Because its investments are mandated to be strategic projects that stimulate the country’s economic development, it targets opportunities that can be grouped under four broad categories: transportation and logistics, including assets such as toll roads, seaports, airports, air cargo and industrial estates; digital infrastructure, including data centres, telco towers, fibre optics and broadband services; social infrastructure, or services such as healthcare; and renewable energy, which includes waste management and other green investments.
BEYOND INFRASTRUCTURE
However, the fund is not restricted to the infrastructure asset class. Without specific allocation targets for each investment category, Hadiwidjaja said that INA can be opportunistic and it “can and will invest in other areas like consumer and technology”.
While the fund “tries to be quite agile and dynamic”, it has its limitations and preferences – it will pursue investments in the private sector over public companies and it will not consider credit, the CIO said.
INA plans to invest directly into assets alongside its global or local investor partners, or through investment vehicles, he said. It may also raise thematic funds for specific sectors and then manage those funds in a style akin to those involved in private equity.
“Hopefully in the next few weeks we can conclude some investments in the area of digital infrastructure, including in telco towers and potentially also in the area of industrial estate,” Hadiwidjaja said.
“This is on top of the 10 or more other deals that we are progressing with, which we can hopefully conclude in the first and second quarters of 2022.”
GOVERNANCE
Reassuring global institutional investors of the fund’s independence and good corporate governance could be INA's biggest challenge, observers told AsianInvestor earlier this year.
With the 1MDB scandal in neighbouring Malaysia still fresh in investors’ minds, it was imperative for INA to ensure that it had the necessary checks and balances in place to avert a similar situation.
“Governance has been super important for us since the beginning. We’ve put an equal effort into ensuring that we have world-class governance practices in place, as we’ve put into investment,” Hadiwidjaja said.
To ensure that investment decisions are made in a transparent and objective manner, INA is overseen by a supervisory board, ethics committee, remuneration committee and audit committee, he explained.
Additionally, INA joined the International Forum of Sovereign Wealth Funds in May as an associate member. Membership requires adherence to the so-called Santiago Principles, one of which stipulates independence to pursue investment decisions and operations, free of political influence.