Canadian pension funds and international sovereign wealth funds have continued their investments in Australian infrastructure and property in recent months, but local funds are far from inactive in this sector and their investment models continue to evolve.
|CPPIB pumped $872 million into the AMP Capital Retail Trust in November 2012
November saw the Abu Dhabi Investment Authority and the Canada Pension Plan Investment Board (CPPIB) pump $872 million into the AMP Capital Retail Trust, which has interests in two of the country’s biggest shopping developments, Macquarie Centre in Sydney and Pacific Fair on the Gold Coast.
The Canadian story has been well documented over the last few years, with estimates of their infrastructure investments up to more than $20 billion. In addition to CPPIB, which also invested $1 billion in Sydney’s contentious Barangaroo development in July, other Canadian funds such as PSP Investments, Ontario Teachers’ Pension Plan and Caisse de depot et placement du Quebec have made forays into Australia.
It’s a small deal, but in November, Caisse funnelled $40 million into the Victorian Comprehensive Cancer Centre, a public private partnership.
Vive la différence!
The differences between the Canadian and Australian investments continue to be around scale. CPPIB is a $160-billion fund that retains its own infrastructure team of around 15 people.
This is an expensive fixed cost which does not stack up for Australian funds. For most much smaller Australian funds, the way to access infrastructure continues to be through pooled investment vehicles such as the fundowned Industry Funds Management and managers such as QIC, Hastings and Access Capital Advisers.
For cost-conscious not-for-profit funds, it makes little sense to maintain their own teams when they can have a stake in IFM, one of the world’s largest infrastructure investors, and enjoy benefits to stakeholders such as last year’s 12.5-per-cent fee rebate.
According to Chant West, Australian funds have allocated 6 per cent of their total balanced portfolios to infrastructure, while the largest fund, Australian Super, has an allocation of 13 per cent to infrastructure. In line with its policy of taking investment inhouse, Australian Super is one of the few to go direct with its infrastructure investments, although the industry jury is out on how successful they have been. Australian Super has now put its stake in Sydney’s Bankstown and Camden airports up for sale.
Like the Canadians
As funds consolidate and grow in coming years, some may create internal infrastructure teams and invest directly in the way that the Canadians have done. The Future Fund has already moved to have a direct stake in its own infrastructure vehicle through its purchase of the airports-focused Australian Infrastructure Fund. The Future Fund has built a $4.3-billion infrastructure portfolio over the last five years, equivalent to 5.6 per cent of its tangible assets program.