Franklin Templeton has expanded a long-standing real-estate investment unit into a new division labelled ‘real assets’ as it adds infrastructure-investment professionals, says Jack Foster, New York-based head of the unit.
Sources say the firm is launching an infrastructure strategy. Foster declines to comment on any specific fund or product, but confirms the idea is to expand the existing business model for real estate, which is primarily a fund of funds. The real-asset division has nearly $5 billion of assets under management, primarily in private real estate.
To that end, he says Franklin Templeton is looking to add infrastructure managers to its platform, including specialists in energy, water, transportation, agriculture and timber.
Asia is a particular target for seeking managers to invest in, or co-invest with, says Foster, who notes that Asia-based managers play an outsized role in the real estate team’s asset allocation. They account for over 50% of the global real-estate portfolio.
“Like in real estate, there’s a swing now to co-investment opportunities, because [underlying] funds can’t raise a lot of capital,” Foster says. “Many of these managers may be too small on their own to target a particular asset.”
He says Franklin Templeton is also open to joint ventures with its managers, especially in Asia. The universe of potential underlying managers has grown to over 400 names, most of which are open to new capital – and most of which are in Asia or other emerging markets.
Foster says although Franklin Templeton has experience with emerging-market managers in the private real-estate space (as well as Reits), investing with infrastructure managers requires some different skills and knowledge. For example, the operational issues in infrastructure are more demanding. The time horizon is also longer for infrastructure commitments.
For that reason, Franklin Templeton is focusing on helping infrastructure managers in brownfield, later-stage developments.
Sources familiar with the company say it has launched a dedicated infrastructure fund of funds, with the aim of raising about $100 million for the commingled product and the possibility of extra private placements for segregated accounts.
However, Foster would not confirm whether the firm is raising assets. He only says that the firm has hired a dedicated infrastructure team to research underlying managers it will look to seed, with the aim of adding 10-15 such managers annually over the coming years.