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Exclusive: Future Fund to boost team, seeks co-invest

Wendy Norris, the Australian sovereign’s new head of infrastructure, continues to see a strong role for managers within the institution’s strategy.

The Future Fund, Australia’s A$117 billion (€81 billion; $91 billion) sovereign wealth fund, is looking to bolster its transactional capabilities as it seeks to invest in infrastructure assets more directly.

Wendy Norris, who last March became the institution’s head of infrastructure and timberland, said during an interview with Infrastructure Investor that the fund’s infrastructure investment team would likely grow from six people currently to nine over the next couple of years.

One position the Future Fund is currently looking to fill is that left vacant by Norris when she succeeded Raphael Arndt, who was promoted to the role of chief investment officer last September. She was previously a director in the organisation’s infrastructure and timberland team for about five years.

An expanded team with stronger transactional credentials would support the fund in its move towards managers that have “very clear” co-investment rights and those which can offer “separate managed accounts-type” structures, Norris said, as well as reinforce its capabilities to execute direct deals.

She still saw an important role for fund managers within the institution’s strategy, in particular from a whole portfolio construction point of view.

“When it comes to asset allocation we try to have the whole team in one room that make joined-up decision on how to invest,” she said. “And to have a very strong origination capability, you need some presence in the market where you want to invest. We use managers to create that execution force for us around the world.”

Norris explained that the Future Fund would typically look for managers whose niche skillset is relevant to a particular geography or risk/reward profile the institution is seeking exposure to. She saw co-investment rights, in that respect, as a useful device to help forge deep and transparent relationships with managers.

“That visibility we get on the inside is a rich source of information that we can then feed in our asset allocation process. The bottom-up perspective it gives us complements the top-down perspective we get from our investment team.”

In response to suggestions that such rights are often asked for but seldom being used, she emphasised that since 2006 the fund has made co-investments almost every year.

Managers the organisation currently works with include AMP Capital, Corsair Infrastructure Management, Global Infrastructure Partners, Highstar Capital, Morrison & Co, Starwood Energy, Campbell Group and UBS Global Asset Management.

Norris said the institution was open to backing first-time funds, albeit only after gaining visibility on their skills and experience. “Making a blind pool commitment to anybody is a big step to take. So investing with a first-time fund is not something we would rule out, but we always do a very deep due diligence. And when there’s not an obvious track record or history of the team working together it’s a bit harder to do.”

Observing that a vast amount of capital was currently flowing towards regulated infrastructure, she reckoned the best risk-adjusted returns came from economically exposed assets as well as from the energy sector.