While the GFC has touched all aspects of funds management, there are some areas where its impact will have a more enduring effect on the way managers structure their investments. One of those areas is infrastructure. GREG BRIGHT spoke to the new team behind the old ANZ infrastructure business – now Infrastructure Capital Group – about the sector’s prospects.
For most super funds and other Australian institutional investors their experience with the ownership of infrastructure assets has, by and large, been a happy one. Not the same can be said for all such investors. Each of the eastern States has at least one disastrous toll road experience for investors and many retail investors in listed infrastructure funds were taught a painful lesson by the GFC.
According to Mike Fitzpatrick, a veteran of the asset class, much of the recent criticism of infrastructure – and certainly that part assigned to the investment banks which packaged and promoted many funds – is justifiable. He predicts that the days when investment banks fed transactions by outbidding each other to win tenders and then structuring the investments into funds, often with long-term management contracts in place, are hopefully over. Fitzpatrick, along with chief executive John Clarke and non-executive director Les Fallick, last year bought the ANZ infrastructure business, which Clarke had run since inception and had about $1 billion invested in two unlisted funds. They have renamed the business Infrastructure Capital Group (ICG). Fitzpatrick, a Melbourne identity due to his football history – a former star player and current chair of the AFL – was a key participant in the rise of infrastructure as an asset class for super funds in the 1990s and early 2000s.
He founded Hastings Funds Management, which was well-supported by some big super funds, and later acquired by Westpac Banking Corporation. Fallick, the chair and major shareholder of the placement agency Principle Advisory Services, is also no stranger to the asset class. He was general manager of the industry fundowned Development Australia Fund in the 1990s and has negotiated various unlisted investments with super fund clients in recent years. His managing director at Principle Advisory, Lachlan Douglas, is also a shareholder in ICG.
Clarke, for his part, was the founding chief executive of the ANZ business, in which he held a minority shareholding, from 2000. He launched its Energy Infrastructure Trust in 2002 and the Diversified Infrastructure Trust in 2006. At the time of last year’s purchase, the two trusts had asset values of about $800 million for energy and $250 million for diversified. Clarke says that the energy fund seemed like a contrarian investment at its time of launching but has earned an average of 20 per cent a year pre-tax since inception and “recycled” between $600-700 million of the investments.