Downing targets ‘real diversification’ with £200m raise

The London-based group has launched a UK-listed renewables fund, targeting investments in both the UK and the Nordics.

UK-based investment group Downing is looking to raise £200 million ($261.6 million; €220 million) for a new London-listed renewables fund, which it says will offer investors “real diversification”.

Downing Renewables & Infrastructure Trust is set to be listed on London’s main stock exchange and is being led by partner Tom Williams, who said that Downing saw a lot of opportunities in the renewables sector, although particularly in the UK and the Nordics. Downing, which has been investing in UK renewables for about 10 years, hired Henrik Dahlström as an investment director in June. Dahlström had previously spent 17 years at Macquarie Infrastructure & Real Assets, most recently serving as its head of Nordics and leading its investment coverage in the region.

The fund is targeting wind, solar and hydropower generation assets, with a small allocation reserved for geothermal power. Williams noted the concentration of other London-listed renewables vehicles and said the continued interest in those funds, trading at a premium of about 15 percent, meant Downing is confident it can coexist in the market. However, he also sees key differences with the new fund.

“We see ourselves as quite different. We are targeting real diversification, by technology and geography,” he told Infrastructure Investor. “That isn’t new, but what is new is to start with that in mind. The peer group at the moment have been enormously successful but have largely been single technology and single jurisdiction. Gradually, now they are talking about diversifying. We respect what they’ve done but we are trying to be different. We genuinely believe that does provide more resilient cashflows.”

Downing is targeting annual returns from the fund of between 6.5 and 7.5 percent, with a yield of 5 percent. The fund also has available capital to invest in non-energy infrastructure such as regulated assets.

“It’s hard for us to make meaningful contribution to those assets in the UK,” Williams explained. “In the Nordics, you can pick up assets easier and be relevant businesses in that space.”

Williams said the fund has so far raised about £30 million, while it has exclusivity on seed assets worth about £70 million. Downing announced on Friday the acquisition of a majority interest in a 100MW wind farm in Sweden, while it also has exclusivity on a hydropower asset.