CASE STUDY

Core-plus/value-add Infrastructure

Asian Pension Plan | Winter 2020

Engagement at a glance

Core-plus/value-add Infrastructure

Bfinance is supporting an Asian pension plan and its gatekeeper in building out a global infrastructure portfolio with an allocation of up to $150 million to fund one or more managers implementing core-plus/value-add strategies spanning OECD countries. The client’s target return is 10% net to complement its existing core holdings.

Client-specific Concerns

Since January 2020, bfinance has been supporting this client in its ongoing search for core-plus/value-add infrastructure managers in OECD countries. The client wanted to invest in pooled funds and had expressed a preference for diversified exposure across traditional infrastructure assets, although it was open to emerging sectors. To that end, managers were required demonstrate their track record in core-plus/value-add investments.

Outcome

  • Planning allocations to optimise pace of commitments: bfinance undertook portfolio-level analysis to help the client assess its potential commitments and better understand its infrastructure exposures and cash flows.

  • Analysing the changing universe of offerings: On a regular basis, bfinance provided the client with updates on the manager universe and fundraising timetables, and helped its team identify several routes to attain double-digit returns – including large-cap managers investing in traditional infrastructure assets; managers seeking to be ‘new entrants’ in emerging sectors; and specialists in niche sectors, such as digital infrastructure and cold storage.

  • Assessing the overlap between new and old: The client sought to understand the complementarity of managers’ strategies relative to its core infrastructure portfolio and the potential combinations needed to achieve double-digit net returns. The client also wanted to explore whether assets targeted by prospective managers would remain within the boundaries of infrastructure or veer into ‘asset-lite’ private equity-style businesses.

  • Adapting to market insight: The client has chosen two managers (to date); one with a bias toward European assets, and one with a bias toward North American assets.

Our specialist says

  • A growing number of infrastructure strategies are veering up the risk spectrum as more capital enters the asset class and core-plus/value-add managers have had to adapt their strategies to maintain return targets, including changing the target geographies or sectors. Effective due diligence, including close scrutiny of managers’ return theses and track records, can help investors to get a clearer picture of capability and credibility.

}