“Between 2010 and 2012 we will  see some good opportunities emerge  because the Government won’t be able  to fund what it wants to do on its own,”  Clarke says. “We’ll probably get into  PPPs … The Government has said that  there has not been enough investment  in infrastructure and the 2009 Budget  recognised that.”  ICG may also look offshore for assets  for the first time.  The firm has maintained a close  relationship with ANZ Bank, which  probably has the best network in Asia  of any of the big four Australian banks.  “We’re a big customer (of ANZ)  and continue to work closely with  them,” Clarke says. “We keep looking at  Asia and elsewhere.”  Fallick says, though, the Australian  investor focus remains. The firm is not  seeking investor funding from offshore.  “We have strong relations with local  investors,” he says. “If we see that there  are bigger assets that might require  some offshore investment then we’ll  look at that. But our focus is on providing  infrastructure opportunities for  super funds.”  ICG speaks for 22 super funds as  clients.

Clarke says that a “mature” diversified  infrastructure fund, such as ICG’s,  would have about 12 investments, totalling  about $2-2.5 billion in value.  But in the past couple of years or  so, the staff of many big pension funds  around the world have looked at the  idea of “clubbing” their investments,  whereby they will form their own syndicates  of two, three, or four investors for  a particular asset, such as an airport or  toll road.  They have a few hurdles to jump in  order to do this.  Firstly, the pension funds need  to have the wherewithal to assess the  investment, with or without investment  banking advice.  Secondly, the funds need to be able  to present a cohesive voice in negotiations.  Thirdly, they need to be able to  manage the asset on behalf of the  syndicate and/or monitor the external  manager’s performance.  Fallick believes that “going direct”  with infrastructure investments may  well be the next big risk for super funds.  “It may well lower the average management  fee that’s paid,” he says, “But  that doesn’t mean that it’s a sensible  idea.

There are all sorts of risks which  need to be analysed. And the best way  to approach those is if your interests are  aligned with the professional managers  that are involved.”  In this new world of investment  post-GFC, where asset allocation has  taken on a new meaning and all asset  classes are being reassessed for their  positions in a portfolio, the questions  surrounding unlisted assets are numerous.  There’s the liquidity issue, of course,  but then the correlations with listed assets  turned out to be a bit of a surprise  during the crisis, at least for some.  And then there’s the fees.  Fitzpatrick believes that over the  next five years or so, there will be an  “investor-led control” of investments in  general. He says that while there will  be some clubbing at the big end, there  will also be a need for knowledge of all  investments.  What this means, he says, is that  the people with the knowledge will need  to enter into true partnerships with the  investors.  “You’ll need to have a long-term  alignment with the interests of the  super funds. You’ll need to have continuous  dialogue and you’ll need to be  continually proving your expertise.”

Join the discussion