One of Australia’s big institutional funds managers has created boutique-like incentives for its global infrastructure team as investors ask which infrastructure mode – listed or unlisted – delivers better portfolio outcomes. MICHAEL BAILEY reports.

A profit participation scheme has just been introduced for Colonial First State Global Asset Management’s global listed infrastructure team, aiming to offer a boutiquelike incentive which “some of our competitors talked about but then didn’t extend to their entire teams”, according to the team’s head, Peter Meany. The scheme allows all of CFS GAM’s listed infrastructure portfolio managers and analysts to share in 25 per cent of whatever profits the team itself makes, with a vesting period of three years. Part of a broader roll-out of profit-sharing schemes to all CFS GAM’s asset class teams, engineered by CEO Mark Lazberger, Meany says the scheme was an addition to salaries and annual bonuses aimed at keeping talented staff employed for the long haul.

The patience and long-term commitment required to benefit from the scheme chimes well with the nature of the asset class, Meany says, particularly at a time where institutional investors feel burned by the listed infrastructure fund offerings from investment banks – which had also played a role in originating some of the underlying stocks. “I think investors are asking: ‘Why would an investment bank run an infrastructure fund at all? They don’t think long-term, they can’t just continue to milk these assets for cash and then flick them’.” A former sell-side infrastructure analyst for Credit Suisse and Macquarie, Meany was brought to CFS GAM in June 2007 to launch its foray into global listed infrastructure, which at that time saw Macquarie Funds Management and Lazard Asset Management taking most of the inflows. Meany laments the timing of the launch was such that “we had about three days of bull market” before global shares began to tank, with over-leveraged and poorly governed Australian listed infrastructure plays among the biggest losers.

The Wholesale Global Listed infrastructure Securities Fund recently had its third birthday, although there weren’t exactly celebrations given its absolute return was a gross -2.83 per cent annualised since inception. However the Fund did outperform its benchmark by 9.4 per cent since June 2007. That should in fact read ‘benchmarks’, because Meany has managed against two – starting off with the S&P Global Infrastructure Index, and then from May 2008 against the UBS Global Infrastructure & Utilities Index. Meany describes the latter as the “best of a bad bunch” of listed infrastructure indixes, because it does not over-represent utilities as much as market capitalisationweighted benchmarks. Utilities are not exactly a favourite of Meany’s team, particularly in Europe where the portfolio manager doubts the resolve of governments to push through any increases in the costs of water or electricity.

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