India has decided to expand its National Investment and Infrastructure Fund, by adding a third vehicle to its platform, which until now included a Master Fund and Fund of Funds strategy.
According to NIIF chief executive Sujoy Bose, the size of the Strategic Investments Fund will be $2 billion and its mandate will be to invest in major infrastructure projects.
The target size for the entire platform when it was launched in 2015, was approximately $6 billion. It was unclear whether the $2 billion was included in the initial total. NIIF did not respond to multiple requests for comment.
However, according to a document released by the Asian Infrastructure Investment Bank, which earlier this week approved a $100 million commitment to NIIF’s FoF strategy, “the target size of NIIF across all its investment strategies is 400 billion rupees (approximately $6 billion), with the government of India investing 49 percent”. NIIF is aiming to raise the remaining 51 percent from both domestic and international institutional investors.
Last October, the Abu Dhabi Investment Authority committed $1 billion to the NIIF master fund. At the time, six domestic institutional investors, including HDFC Standard Life Insurance, HDFC Asset Management, Housing Development Finance Corporation, ICICI Bank, Kotak Mahindra Old Mutual Life Insurance and Axis Bank, were also set to make commitments.
For its FoF strategy, NIIF is targeting $1 billion. India’s government has already committed $500 million to the strategy, while AIIB’s $100 million commitment will help NIIF reach a first close on $600 million. The Asian multilateral said it is also considering a further investment of $100 million in the FoF final closing.
The fund of funds strategy is expected to anchor or invest in alternative investment funds managed by external fund managers that have good track records in infrastructure and related sectors in India, while seeking to achieve attractive risk-adjusted returns over the long term. It will target green infrastructure, affordable housing and infrastructure services.
In April, NIIF made its first investment through its FoF strategy, committing £120 million ($159 million; €136 million) to the Green Growth Equity Fund, a £500 million clean energy-focused vehicle co-launched by the UK and Indian governments. At the same time, it also appointed EverSource Capital, a joint venture between India’s Everstone Group and the UK’s Lighthouse BP, as the general partner of the green fund.
“The NIIF will provide access to a diversified range of sub-funds and trigger a multiplier effect in attracting capital,” said Dong-Ik Lee, director general of investment operations at AIIB. “With AIIB’s investment in the NIIF, we will help pool commitments from long-term investors such as multilateral institutions, sovereign wealth funds, pension funds and insurance companies, within and outside India, to make investments in the country’s infrastructure sector.”
AIIB had not responded to queries seeking further comments by the time of publication. However, the bank’s chief investment officer DJ Pandian told Infrastructure Investor in an interview in April the bank would provide seed funding to vehicles with a diversified portfolio in a bid to leverage more capital to invest in projects in the region.
Pandian added that the bank has allocated $2 billion, which is 10 percent of its paid-in capital for the first five years of operations, to equity investments.
In 2017, AIIB approved commitments of $150 million each to two infrastructure equity funds – Morgan Stanley’s $750 million North Haven India Infrastructure Fund and the $1 billion IFC Emerging Asia Fund.