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/* Style Definitions */ table.MsoNormalTable {mso-style-name:”Table Normal”; mso-tstyle-rowband-size:0; mso-tstyle-colband-size:0; mso-style-noshow:yes; mso-style-parent:””; mso-padding-alt:0cm 5.4pt 0cm 5.4pt; mso-para-margin:0cm; mso-para-margin-bottom:.0001pt; mso-pagination:widow-orphan; font-size:10.0pt; font-family:”Times New Roman”; mso-ansi-language:#0400; mso-fareast-language:#0400; mso-bidi-language:#0400;}In 2007, two fiduciary funds from different continents executed a co-investment deal in another continent again, buying almost half of Birmingham International Airport. Leo de Bever, one of the key decision-makers in the transaction and now CEO of the Alberta Investment Management Corporation (AIMCo), tells SIMON MUMME about the necessary resources, relationships and disciplines required for co-investment deals, and the scope for future international collaborations among pension funds.

When the Birmingham Airport deal went through, Leo de Bever was chief investment officer of the $32 billion Victorian Funds Management Corporation (VFMC). He drew on contacts from his old employer, the C$87.4 billion (A$99.9 billion) Ontario Teachers’ Pension Plan (Teachers’), to spearhead the transaction, which saw VFMC and Teachers’ own 48.25 per cent of the airport in a 40/60 split, respectively. The funds paid $1 billion for the asset.

The deal made strategic sense from the outset. Both funds held similar return expectations from the investment (at the lower spectrum of equity returns, but with less risk) and the resources to manage it, an aligned investment timeframe, and an interest in driving down the costs of infrastructure investment. They also had the right connection: a couple of years before joining VFMC, de Bever had ended a 10-year term as Teachers’ head of research and economics, and was responsible for its long-term investment strategy, risk management and real assets.

During his tenure at the Canadian fund, he hired and trained the infrastructure team that he later worked with on the Birmingham deal. “If you know the players it’s easier to achieve an alignment in terms of what you want as an investment horizon and in return expectations,” de Bever says. “All of these deals depend very heavily on personalities.” The unlisted assets that suit coinvestment by pension funds are usually private equity, infrastructure and timber, he says. Essentially, the deals are outcomes of “like-minded investors that get together and put money on the table”.

He expects more co-investments between funds as they continue to build scale in the long-term, and develop more internal capabilities for investing in illiquid assets. “Last time around, pension funds were too immature at investing in private equity and infrastructure to do this on a big scale,” he says. “In the next wave, you will see combinations of European pension funds and North American pension funds banding together because the economies of scale are so compelling.

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