Large superannuation funds should be fully aware of the skills and governance structure required to strike infrastructure deals before they decide to build internal teams or pursue co-investment opportunities to gain further exposure to the unlisted assets, Industry Funds Management (IFM) executives warned. Christian Seymour, IFM executive director – Europe, said funds that were considering building large infrastructure teams should be prepared to accept the workloads and resources required to skilfully originate infrastructure deals, negotiate transactions and manage the assets – and then question whether their governance framework enabled them to swiftly deploy capital when opportunities arose. “In the heat of an infrastructure transaction, when you have to make decisions quickly – a lot of funds aren’t set up to decide on a price and draw down on the capital within 10 days,” Seymour said.

He said an internal infrastructure team would only become practical if a super fund’s “resources are experienced enough to make a snap asset allocation committee meeting”. “The worst thing that can happen is when it comes to the crunch, investors are missing a piece of capital because they can’t move quickly enough.” Seymour said most funds were not currently able to bear the due diligence, logistical, commercial and tax workloads involved in an infrastructure transaction. IFM is wholly owned by 36 super funds and manages infrastructure, private equity, listed equity and debt funds from its base in Melbourne and regional offices in New York and London. Some of IFM’s owners, such as the $6.9 billion HOSTPLUS, the $13 billion HESTA and the $28 billion AustralianSuper, have discussed co-investment oppor- tunities in infrastructure assets among themselves in recent months. Dunia Wright, IFM’s head of US and Europe, is confident that IFM is nimble enough to lead co-investments being considered by its super fund owners.

“The whole idea of IFM when it was founded was to create an entity interested in and qualified to have a seat at the table during these transactions, and do it at lower costs than, for example, investment banks,” Wright said. “We have a very different investment discipline. Our mandate is to source highquality deals for our underlying investors, many of whom are also our owners.” Meanwhile, IFM is preparing to market its global infrastructure fund to UK and European institutional investors, after spending two years building its team and acquiring assets in the region. IFM now had a team capable of originating and managing infrastructure assets from its office in the City of London, which was set up in December 2006, and had begun initial discussions with investors in the UK and Europe, Seymour said. “But it is still early days because the market has been atrocious. Our view is that in 2010, we’ll start fundraising in earnest.” While Australian superannuation and Canadian pension funds spearheaded infrastructure investment in past decades, many UK, US and European funds were beginning to see “the long-term liability match” and perceived diversification benefits from exposure to the assets.

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