Infradebt, a Canberra-based specialist fund manager, has reached a first close on A$55 million ($43.8 million; €36.8 million) for an ethically screened infrastructure debt fund, with a cornerstone commitment of A$50 million from Future Super.
The firm looks to grow the Infradebt Ethical Fund to A$200 million within the next two years, Alexander Austin, chief executive and founder of Infradebt, told Infrastructure Investor.
The Australia-focused debt fund is an open-ended vehicle investing in projects that make positive social and environmental impacts. It is specifically designed for institutional investors seeking an ethically screened fixed-income strategy.
Future Super, Australia’s first fossil fuel-free super-fund, managing about A$340 million, said the commitment was aligned with its strict ethical screens and allowed increased exposure to a range of renewable energy and social infrastructure projects. The Infradebt fund will provide a core illiquid credit exposure within Future Super’s defensive portfolio allocation.
The ethical debt fund will originate lending opportunities with project proponents, co-invest in syndicated lending facilities and trade opportunistically in the secondary debt market.
Austin added that three-quarters of the fund will be invested in renewables-related businesses, including solar and wind power generation and storage, with the remainder to be spent on social infrastructure.
The fund is targeting a net return of 2 percent above its benchmark, which now stands at 2 percent. Its initial seed portfolio is offering a return of about 7 percent, according to Austin.
He added that the fund is looking to deploy about A$20 million over the next quarter, with each investment ranging from A$5 million to A$20 million. Over the next five to six months, five or six investments will be finalised. Austin also noted that for borrowers, the fund can enable the firm to customise lending strategies that meet the unique demands of individual projects.
Infradebt was founded by Austin and his partner Alex Ramsey in 2013. They had worked together at Access Capital Advisers, which is now known as Whitehelm Capital.
The firm has been providing its clients, mainly Australia’s superannuation funds, with direct access to infrastructure private debt markets on a deal-by-deal basis. The Infradebt Ethical Fund is the firm’s first pooled fund.