CASE STUDY

Open-Ended Core Infrastructure

European Pension Fund | 2021

Engagement at a glance

Open-Ended Core Infrastructure

A European pension fund was seeking to make an inaugural investment in a global, core/core-plus open-ended infrastructure strategy and planned to make a single allocation of EUR 70 million.

Client-specific Concerns

The client wanted to identify an infrastructure strategy that would provide healthy diversification across geographies, sub-sectors and underlying assets in developed markets. In making its debut allocation to the asset class, the client wanted to understand the nature of underlying cash flows associated with various assets and the types of risks to which it would be exposed. Examining the behaviour of portfolios – and their resilience during the 2020 Covid crisis – was therefore a central part of the evaluation process.

Outcome

  • Mapping the landscape of global infrastructure offerings: After gathering data and conducting an initial evaluation of 30-plus open-ended global infrastructure strategies, bfinance worked with the client to refine the field of choices and explore ten strategies in depth; the client subsequently selected five managers to interview.

  • Delving into the granularity of track records: As part of the manager evaluation process, the client sought to understand key drivers of overall fund performance at the portfolio asset level, including analysis of quarterly performance throughout 2020.

  • Supporting investment-committee-level education: In addition to aiding the client’s manager evaluation, bfinance assisted the investment committee in parsing the defensive characteristics of various core/core-plus asset classes as well as the relative defensive strengths of the five managers shortlisted for interviews.

  • Analysing assets, key risks and value drivers: After the interview stage, bfinance prepared an asset-level analysis of the two finalist managers under consideration. This analysis helped the client understand the relative risks and value drivers, performance outlooks and ESG considerations for selected assets.

Our specialist says

  • Burnished by the allure of liquidity, rapid capital deployment and long-term holding periods, open-ended funds have become attractive vehicles for investors entering infrastructure. At the same time, we’re seeing a flurry of funds being launched: More than 30 open-ended funds are now available, covering a variety of diversified and sector-specialist strategies across the risk spectrum. As their track records mature, these funds are providing a growing body of data for investors seeking to understand whether their strategies live up to all that they promise.

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