Industry Funds Management says it is a long-term investor. Very long-term in a business where long-term is considered by many asset managers to be five years.
“We have an investment horizon of 50 to 60 years,” says Kyle Mangini, IFM’s global head of infrastructure, who moved to Australia in 1991 after graduating from Wesleyan University in Connecticut.
IFM which has a $10 billion global infrastructure fund has an almost 17 year track record and a 40 member team. Its annual net returns are 12.2 per cent from August 1995 and December 2011. IFM takes stakes of between 15 per cent to 100 per cent in assets including toll roads and airports in Australia, sometimes with other investors.
It has a 27 per cent stake in the Port of Brisbane and will likely bid for a stake in a Sydney desalination plant.
“Water has low demand elasticity,” says Mangini.
Mangini says the U.S. market for infrastructure investors has been slow to develop.
“They’ve been talking about putting more money in American infrastructure for 20 years,” says Mangini. “But there has been relatively little action getting things done.”
He is bullish on Germany.
“We’re very comfortable with Germany,” says Mangini. “It is the power house of the EU. We’ll put money in Germany ahead of any other economy in Europe.”
Peter Meany, head of global listed infrastructure at Colonial First State Global Asset Management, says for pension funds like IFM there is a dearth of investment opportunities in unlisted infrastructure.
In the last 12 months three consortiums have paid a 35 per cent premium to acquire infrastructure assets.
In contrast, Meany says, the global market value of listed infrastructure stocks is about US$1.5 trillion.
“Having a portion of the portfolio in listed infrastructure gives diversification, gets an investor set quickly and gives them flexibility to alter their investments,” says Meany, who manages a fund with $1.1 billion assets under management.
“There is a lot of pressure on trustees to think about liquidity in the wake of the global financial crises,” he says.
Over four-and-a-half years Meany’s fund has had annual gross returns of 1.6 per cent. Over three years 14.9 per cent.
Meany worked as an analyst at Macquarie Group at Credit Suisse Group AG for a decade before joining his current firm in January 2007. He spent six months building an investment team that now has eight people, one of whom is based in Hong Kong looking at ports as potential investments.
A quarter of the team’s remuneration is based on company visits and visits. Meany took a pilot boat tour of the Port of Los Angeles to get a better idea of how it operates.
Colonial First State has an investment in Union Pacific Corp. that has a rail connection to L.A’s port.