UBS is about to launch a new global infrastructure fund of funds named the UBS AFA Global Infrastructure Multi-Manager Fund. It has an initial target size of $200 million. Aimed at institutional investors, it follows in the footsteps of a sister fund aimed at Swiss pension funds named the UBS Investment Foundation Infrastructure that raised CHF1.5 billion, so the hope is to achieve a larger final closing size for the new fund.
The fund will be managed by the Zurich-based team headed by Ulrich Keller, the CIO of the alternative funds advisory unit of UBS.
There will be a five-year build-up period, investing in three to five funds per year, which will result in a portfolio of about 100 projects. Nearly all monies will be allocated towards mature PPPs, utilities and transport assets. New developments, such as toll road projects will be avoided, though there may be some residual exposure to riskier start-up projects if the underlying funds have some minor exposure to them.
Geographical concentration of investments will be focused almost entirely at the US and Europe, but once again there may be some emerging markets/Asian exposure if the funds have a small allocation to those markets. The fund will not invest in listed infrastructure as it is perceived as too volatile and subject to high market beta.
The tenor of the fund is 10 to 15 years with cash distributions made regularly to investors, but there will be no liquidity. Fees for the fund are 80-85 basis points and a 10% performance fee over a hurdle of CPI + 6% including a high watermark. These fees will be on top of the underlying fund fees of approximately 1% to 1.5% management fee and 20% performance fee.