Caledon: direct investing ‘growing in popularity’

Caledon Capital Management, a consultant, has identified direct investment in infrastructure as an emerging pension trend and is thinking of beefing up its team to satisfy client demand, partner Asif Hussain (pictured) said.

Six-year-old Caledon Capital Management, a $3.5 billion investment consultant headquartered in Toronto, is foreseeing an upturn in direct infrastructure investing throughout the pension fund space.

“Direct investing has gained a lot of popularity,” said partner Asif Hussain, who joined Caledon from the Abu Dhabi Investment Authority (ADIA) in 2010. “There is a growing desire to hold an asset that is stable and able to provide yield, which is what an infrastructure asset can offer, and direct investing can provide a pension fund with this profile”.

Likewise, Hussain cited a mounting awareness that a solid infrastructure asset is attractive as a long-term holding. A pension fund investing via a general partner (GP) can lose exposure to an infrastructure asset, should the GP decide to exit its stake.

“One concern is losing the asset and the opportunity cost of re-investing,” Hussain explained. “That can happen even if the institution is co-investing, and the co-investor is ‘dragged out’”. 

A professional with experience in direct investing is “valuable,” Hussain said. “You find it [direct investment experience] with people who have been in the industry for a while, who have been, for example, with Macquarie Group or another Australia-based institution, or with a Canada-based pension fund, who then moved on,” Hussain said. “It is definitely a smaller universe”.

Hussain admitted Caledon is anticipating an increase in hiring personnel with direct investment experience, based on client need, in light of the burgeoning institutional demand.

In addition to working in the infrastructure group for ADIA, Hussain has also served with Borealis Infrastructure, an Ontario Municipal Employees Retirement System (OMERS) company. Caledon founder David Rogers ran the private equity program for OMERS before starting Caledon in 2006.