A year later, RBC quietly folds infra fund of funds

The asset manager in 2010 made a high-profile debut in infrastructure, hiring Joe Lyons (pictured) from Macadam Asset Management. RBC is claiming a focus on wealth management underscored its decision to 'discontinue' the group.

A year ago, Royal Bank of Canada (RBC) broke into infrastructure investing with aplomb, hiring a veteran team to roll out a fund of funds. The initiative acknowledged a burgeoning institutional client appetite for infrastructure by RBC, a well-established brand name.

But that enterprise never bore fruit. RBC has “discontinued” its infrastructure fund of funds group amid a choice to instead strengthen distribution for its traditional asset management business, RBC admitted to Infrastructure Investor.

“The decision was the result of thorough and rigorous evaluation of potential profit contribution [companywide],” said a spokesman for RBC Global Asset Management (RBC GAM).

The spokesman went on to tell Infrastructure Investor that RBC could not comment whether its erstwhile infrastructure personnel remained with the company.

In 2010, Infrastructure Investor exclusively reported that RBC had installed Joe Lyons, Nancy Mangraviti, Matthew McPhee and Whit Porter in its RBC GAM office in Boston.

Lyons, McPhee and Porter had founded Macadam Asset Management, a fund of funds focused on infrastructure.

In the institutional market, a fund of funds investment is often considered an ideal inroad to investing in an alternative asset class. Rather than risking direct investment in an untested asset class, a fund of funds allocation can provide diversification via allocating investor capital to more than a single manager.

In the hedge fund industry, for example, the fund of funds model gained popular appeal based on its perceived diversification, and garnered the bulk of inflow once institutional clients began to abandon mutual fund investing in favour of an asset class with less market correlation.

As a result of institutional demand, financial services provider UBS launched an infrastructure fund of funds, as did infrastructure powerhouse Macquarie Group and London private equity firm Pantheon.

Lyons, McPhee and Porter launched Macadam, a $300 million infrastructure fund of funds, in 2009. Legal counsel Mangraviti had been with Bank of America.

As for its distribution, the spokeswoman explained RBC hired Matthew Appelstein, who had prior worked for Old Mutual Asset Management (OMAM) in Boston. The spokeswoman said Appelstein would concentrate on high-net-worth and sub-advisor distribution for RBC GAM.