Industry Funds Management (IFM), the superannuation-owned Australian fund manager, has posted solid yearly returns for both its Australian and international infrastructure businesses.
In the year to June, IFM’s global infrastructure fund returned 14.3 percent, while its Australian infrastructure vehicle recorded returns of 12.1 percent. The latter has been returning 12 percent a year for the past 18 years. Both results are after fees and taxes.
In addition, the Australian fund manager grew its assets under management by 34 percent to A$46.2 billion (€32.1 billion; $42.3 billion), thanks in large part to a recent spate of infrastructure acquisitions.
“We have had a very active year,” Kyle Mangini, IFM’s global head of infrastructure, told Infrastructure Investor. “MAG [the acquisition of Manchester Airports Group] was effectively two deals in one [the MAG acquisition included the purchase of London's Stansted Airport].”
IFM also increased its stake in Melbourne and Darwin airports. In the case of Darwin, IFM increased its ownership to just over 77 percent, approaching full ownership of the asset.
In the case of Melbourne and Darwin, Mangini says the deal marked “the fifth time we have exercised pre-emption rights” in relation to these interests – “this is a reflection of the option value that is built into our portfolio,” he argued.
And then, of course, there was the headline-grabbing 99-year lease of ports Botany and Kembla, for A$5 billion, in New South Wales, Australia. All of which paints IFM's recent acquisitions with a similar brush: assets with a strong correlation to gross domestic product (GDP).
“Being an open-ended fund, we think beyond 12-month blocks. Historically, we have targeted regulated assets when they were seen as very stable and boring. More recently, we have been actively acquiring GDP-linked assets, where there is better value,” Mangini noted.
Looking at IFM's portfolio also casts some of its recent acquisitions in a particular light. MAG, for instance, is IFM's first international transportation asset, bringing diversification to a European and US portfolio dominated by energy and other regulated investments.
“Diversification of assets in our portfolio is designed to outperform in a range of macro-economic scenarios,” Mangini explained. “[When investing] we look at the revenue characteristics of each portfolio asset as a guide to target future assets that increase diversification.”
IFM is now managing an infrastructure portfolio valued at around A$14 billion. It currently employs 170 people, a 22 percent increase compared with last year.