A consortium of Japanese corporate pension funds are among a new batch of investors in AMP Capital’s Global Infrastructure Fund. The strategy attracted $400 million in total for its second and third closes and expects to hit its $1.5 billion hard target by mid-2016.
Anthony Fasso, chief executive for AMP Capital's international business, told AsianInvestor: “There is strong demand from Asia pension funds and insurers, but also from western Europe, the Nordic countries and North America.”
In a previous round of capital raising, AMP saw investment from a Korean pension fund and Fasso sees demand growing in Asia. "Government pension funds around the world are increasingly allocating to infrastructure, including pension funds in Asia. The government funds in Japan, for example, are looking seriously at it now." Fasso declined to identify investors in AMP's vehicle.
Both Japan's $1.2 trillion Government Pension Investment Fund and the Pension Fund Association (PFA) are already invested in infrastructure. GPIF started its infrastructure investment programme two years ago, when it struck a co-investment agreement with Development Bank of Japan to invest $2.7 billion over five years into the Global Strategic Investment Alliance (GSIA). This is a programme set up by Ontario Municipal Employees Retirement System (Omers) to buy infrastructure assets in developed countries.
The GSIA programme has $11.25 billion in AUM, and other consortium members include the PFA. Omers returned an annualised 11% from infrastructure between 2009 and 2013.
Event Alert: Japan’s GPIF, Pension Fund Association and a cross section of Japanese corporate pension are joining Asianinvestor’s Japan Institutional Investment Forum <http://www.japaniif.com/> in Tokyo, March 10th. For further information visit www.JapanIIF.com
Meanwhile, Australia's Macquarie Infrastructure and Real Assets this week said it had closed its first Asian regional infrastructure platform with $3.1 billion in commitments.
Pension funds are seeking infrastructure assets because they meet their need for low volatility, high yield, GDP and inflation linkage, and low correlation with equities.
However, while big institutional investors all want to buy high-profile, so-called ‘trophy assets’, AMP’s advice is to go for mid-market deals, in the $100 million to $750 million range. “The trophy assets are very expensive, and everyone’s fighting over them,” said Fasso. "If you don’t get a piece of the action, you still need to put that money to work."
AMP Capital’s infrastructure equity arm runs $7 billion in assets, out of a the firm's total $115 billion. The global infrastructure platform launched in October 2014, when the firm converted its Strategic Infrastructure Trust of Europe from an open-end to a closed-end European fund and launched the Global Infrastructure Fund.
The fund's target internal rate of return (IRR) is a gross 12-15% annually and it has a gross cash yield of 4-6%, and since inception has generated an IRR of 18.6%. Its mandate is to focus on mature, brownfield assets that hold monopolies or long-term contracted revenues in sectors such as transport, energy, communication and utilities.
In addition to seeking infrastructure exposure, pension funds in Asia are building alternatives exposure across the board, with a view to boosting portfolio diversification and returns. Recent examples include China’s National Social Security Fund, Malaysia’s Employees Provident Fund and Taiwan's Bureau of Labor Funds.