Three months after deciding to invest $400 million in Global Infrastructure Partners’ third vehicle, the Oregon Investment Council (OIC) has pledged the same amount to rival offering Brookfield Infrastructure Fund III (BIF III).
OIC approved the commitment at a meeting earlier this month, a spokesperson told Infrastructure Investor, following the recommendation put forth by OIC’s investment staff and pension consultant TorreyCove Capital Partners. Brookfield Infrastructure is targeting $10 billion for the vehicle.
While OIC had not previously invested in an infrastructure fund managed by Brookfield, its relationship with the Canadian firm dates back to August 2013, when it committed $50 million to Brookfield Global Timber Fund V. A larger commitment of $100 million followed in 2015 to Brookfield Agriculture Fund II.
“The fund will be managed by Brookfield’s infrastructure group, which is one of the world’s largest owners and operators of infrastructure assets,” OIC investment staff wrote in a memo. “Of note, Brookfield manages $48 billion of infrastructure assets across five continents. Staff believes this vertical integration sets Brookfield apart from other infrastructure investors in that it allows the firm insight and management capability in all phases of the investment cycle.”
Like its predecessor, BIF III will invest in the transportation, energy and renewables sectors in OECD countries. Fund III, which has a hard cap of $12 billion, will target investments ranging from $400 million to $1 billion in size. It will have a four-year investment period and a 12-year term, subject to two one-year extension options.
According to OIC's meeting materials, Brookfield is expected to hold a first close on the fund sometime this week. Brookfield did not respond to a request for comment.
OIC invests all of the State of Oregon’s funds, including the Oregon Public Employees Retirement Fund (OPERF).
The organisation has previously stated that it intends to shift towards alternatives, which for OIC includes infrastructure, agriculture and timberland, since returns on these investments are ‘less correlated’ to traditional stocks and bonds and they increase portfolio diversification.
OIC’s target allocation for alternatives is 10 percent. For infrastructure specifically, the target allocation is 20 to 30 percent of the alternatives portfolio or about $1.7 billion to $2.5 billion at current OPERF net asset value, which as of 30 December 2015 totalled $68.04 billion. To date, OIC has earmarked $1.95 billion for investments in the asset class.
OPERF is part of the Oregon Public Employees Retirement System (OPERS), the vehicle through which public employers provide retirement benefits to Oregon's public employees. With more than 900 public employers participating, OPERS covers 95 percent of all state and local government employees in the state.
OPERS is directed by its own independent board and administered by its own agency based in Tigard, Oregon. Its contributions go into the Oregon Public Employees Retirement Fund, which pays OPERS members their benefits.