AMP Capital is bullish on social infrastructure.
The asset manager has $100 million in its Community Infrastructure Fund and it reckons it can get a lot bigger once some of the $1.3 trillion in superannuation money begins sending funds its way.
“There is a sense of social good driving investors,” says Paul Foster, head of infrastructure Australia and New Zealand for AMP Capital.
There are 150 social infrastructure projects in Australia and New Zealand with a total equity value of about $27 billion. AMP Capital says $3.9 billion of infrastructure will be constructed within the next five years.
Unlike investments in other infrastructure assets such as toll roads, investors in social infrastructure are not exposed to patronage risk, says Julie-Anne Mizzi, a portfolio manager in AMP Capital’s Community Infrastructure Fund.
Moreover, governments will compensate investors if they were close down a social infrastructure asset such as a school, she says.
AMP Capital waits until a school or a hospital is constructed and then seeks to manage the operating services around the asset for as long as 30 years. Such an investment can garner annual net returns of 10 per cent, says Foster.
Hospitals such as a new cancer institute and children’s hospital in Victoria as well as the extension of the Royal North Shore Hospital in Sydney may be potential public, private partnership investments for AMP Capital’s fund.
“There is a strong pipeline of deals,” says Mizzi. “Victoria is a leader in private, public partnerships.”
This month AMP Capital announced it will acquire $232 million of infrastructure assets that include six new schools in Adelaide. It will manage the upkeep of the schools through a third party service provider and AMP investors are paid a regular fee over 27 years if the school’s grounds and buildings are maintained and operated properly.