KPMG’s new real assets consulting business, aimed squarely at superannuation funds, will not be incentivised to originate deals for clients but will instead advise them on the many implementation and governance factors surrounding transactions, James O’Leary, head of KPMG Investment Consulting, said.
O’Leary, a former CFS GAM infrastructure and private equity chief, said the KPMG unit would “support” super funds on a traditional advisory basis in their transactions, rather than guide them towards particular assets.
This focus on the governance risks in real assets transactions was appropriate in an environment where the prudential regulator was putting more emphasis on trustee accountability and professionalism.
“If they move into a transaction, we would step into the shoes of the fund and help them with the investment. We would assess the governance arrangements and the risks involved,” O’Leary said.
He said the consultant would advise funds on a fully traditional basis.
“We’re not deal originators,” he said. “Our remuneration is independent of whether transactions proceed or don’t.”
“Once you start originating deals, you start to lose that independence.”
This is different to the remuneration model of another consultant specialising in illiquid investments, Access Capital Advisors, which sources no insignificant part of its revenues from fees arising from transactions that its clients have made.
The primary market for the new KPMG unit were super funds with internal investment teams that bought stakes in infrastructure and real estate, and invested with private equity managers through discrete mandates.
This helped the funds achieve specific portfolio outcomes and also provided an opportunity to bargain for lower fees and gain beneficial ownership and liquidity terms.
O’Leary said KPMG would also approach funds undergoing mergers or negotiating changes in the ownership or operation of the real assets they were already invested in.
This would not bring into direct competition with comprehensive asset consultants.
“An asset consultant is responsible for whole-of-fund activities, portfolio construction, strong capability for manager research. In the context of direct investments, because they’re inherently transactional in nature, you need transactional skills.”
He has recruited some former CFS GAM colleagues into the business. Duane Cadman, who managed private equity and helped set up the business’ North American office, joined in January, about four months after infrastructure specialist Edward Lloyd, who assisted in CFS GAM’s expansion into Europe, came on board.
In its work, the team would have access to KPMG’s global resources and knowledge base about infrastructure and resources, O’Leary said.
