Top Canadian public pension fund The Ontario Municipal Employees Retirement System is targeting opportunities in digital communications infrastructure as well as green investing for its Asia-Pacific infrastructure strategy, with a plan to more than double its share of Apac infrastructure investments in five years’ time.
The C$105 billion ($87 billion) fund entered the infrastructure sector more than 20 years ago. Its current infrastructure allocation of 22.5% exceeds that of most institutional investors’, and it is set to pour more than $2 billion into new investments.
Omers is also keen to expand beyond its current infrastructure investments in India and Australia, and Asia will be its preferred market – over Europe – when it comes to renewable energy infrastructure.
Renewables and telecoms were strong themes for Omers Infrastructure across the region, Christopher Curtain, the division’s head of Asia Pacific in Sydney, told AsianInvestor. In addition to data centres, digital telecommunications sectors being considered include fibre networks, communication towers, satellites, and energy metres (where Omers Infrastructure had a successful investment in the UK).
“The consistent thematic is strong tail winds and growth and lack of correlation with other assets,” he said.
The fund plans to increase Asia Pacific allocations to between 10% and 20% of its total infrastructure allocation by 2026, up from its previous target of between 5% and 15% last August.
Given the obstacles to travel arising from the pandemic, Curtain said that the division had to rely more on its existing network of advisers as well as relationships with key institutions for opportunities in the past year.
“If we get to 20% [allocation for Asia Pacific], then we will have done great,” said Curtain. “We have to be patient, pragmatic, and realistic. We are still early in the journey.”
Infrastructure assets currently stand at $19.6 billion, with regional assets comprising 8% of the total, at $1.6 billion. Increasing the current Asia Pacific allocation to 20% would see $2.3 billion of new money flow into regional infrastructure – and that number could be higher, given that Omers’s total assets under management is set to grow.
All allocations will be via direct investments, and Omers Infrastructure is targeting returns of between 8% and 12%. In terms of deal size, its sweet spot in Asia Pacific remains around $1 billion.
Alastair Hall, Omers Infrastructure’s global head of investment strategy and partnerships in London, told AsianInvestor the division is prepared to identify and build infrastructure assets as well as purchase existing assets across its global portfolio, adding that it was considering joint ventures as well as investing alone.
“[We will] move earlier into [the] development stage for popular sectors,” Hall said. “[The way] to mitigate the risk of doing this is partnering either with a trusted investment partner, a corporate, or a local investor. We want to be more collaborative.”
He indicated that Omers Infrastructure had spent time developing relationships with state actors, investment partners, and corporates recently, although he declined to mention names.
“We have a good dialogue with the key players in the main geographies we are targeting,” Curtain confirmed.
Omers Infrastructure’s last investment in the Asia Pacific region was in July 2020, when it acquired a 20% stake in Australian energy company Transgrid for an undisclosed sum. Transgrid was sold by the New South Wales state government for $10.3 billion in 2015.
Prateek Maheshwari, Omers Infrastructure’s London-based Asia head (who will move to Singapore later this year, following the departure of Bruce Crane to Canadian fund Ontario Teachers’ Pension Fund), said the business was looking at several potential investments in both the renewable energy and digital communications infrastructure space in India. Omers hopes to buy a single platform in both cases, subsequently expanding through organic platform growth.
The infrastructure division’s co-shareholders in Indinfravit, an Indian toll road platform it co-owns through a 2019 investment, are The Canadian Pension Plan Investment Board, Allianz, and Indian company Larsen & Toubro.
“The general approach is to look for a strong management team, meaning [they are] not just operating megawatts now, but [have the] potential to grow further,” Maheshwari said of the renewables strategy. Digital communications infrastructure is another focus area in India, he added.
Curtain confirmed that Omers Infrastructure remained interested in Australia, despite the competition.
“In Australia, we are seeking a high-quality and strong platform,” he said. “Renewables has been a very active sector there over the last twelve months. It is a crowded space and sector that has a lot of tailwinds.”
He explained that auctions were now the norm for buying these assets. Omers had been reportedly bidding for Australia data centre platform AirTrunk, which was bought by Macquarie Infrastructure and Real Assets in April for $1.9 billion.
Besides India and Australia, the fund is looking to opportunities in Indonesia, the Philippines, Japan, and Korea. This is a reduced list from last August, when Ralph Berg, then global head of infrastructure at Omers, cited Singapore, Taiwan, Japan, South Korea, Indonesia, and Malaysia as potential investment opportunities.
Curtain said that across the region, the pension fund is seeking the same features in prospective deals: the right operators, regulatory framework, and deal structure in countries driven by a young population, a growing middle class, and rapid urbanisation, adding that platform acquisitions could include assets in more than one country.
Data centre opportunities are also being pursued via Oxford Properties, Omers’s real estate arm. Omers Infrastructure does not yet have a data centre allocation globally, preferring fibre networks instead, said Hall.
“On a relative basis, there is a better fit for infrastructure in fibre: it is more related to our overall risk appetite and we see fibre as a future essential service.”