IPERS seeks value-add funds after $300m deployment with Brookfield Super Core

The US public pension is eyeing further commitments in the sector after its maiden infrastructure investment was drawn down in April.

The Iowa Public Employees’ Retirement System is eyeing investments in value-add infrastructure funds after deploying its maiden infrastructure equity commitment with Brookfield Asset Management.

Documents last week revealed its $300 million commitment to Brookfield’s Super Core Infrastructure Fund had been drawn down in April, nearly two years after the $43 billion US public pension plan selected the fund from a group that also included IFM Investors, First Sentier Investors and JPMorgan Asset Management. IPERS, which had been looking specifically for open-end funds, received 12 responses to its RFP.

“We wanted to diversify our real assets portfolio. As our first investment in infrastructure, we decided to go into it at the lower end of the risk spectrum with this core exposure,” Pat Reinhardt, senior investment officer for alternatives at the LP, told Infrastructure Investor. “We had three objectives: inflation-hedged, income-generation and diversification, and for what we were looking for at the time, the fund had all three of those.”

Reinhardt added that Brookfield’s Super Core fund, which launched in 2018 as a global vehicle, has delivered a distribution yield since inception of 6 percent and has commitments totalling just over $7 billion.

As for the time it took to deploy IPERS’ investment, Reinhardt said the pension fund would have liked to have had its funds drawn down a lot sooner, but the wait came as a result of the investment queue. IPERS had first identified Brookfield as its likely recipient in June 2020.

The Brookfield fund at the beginning of June closed a deal alongside Alecta, Sweden’s largest pension fund, to acquire a 49 percent stake in Telia’s tower business in Sweden, implying an enterprise value of SKr11.2 billion ($1.1 billion; €1 billion) and a 28.2 times multiple of its 2021 EBITDA.

IPERS has issued a request for further fund proposals to its real assets portfolio and has about $400 million to deploy, downsized from $800 million due to market volatility and a reduction in the overall fund size. The $300 million commitment to Brookfield was larger than its usual fund deployments, which are about $100 million, Reinhardt said, and future investments will be more towards that size. He said the fund will look more towards global, value-add infrastructure funds targeting low double-digit returns.

“We appreciate we’re probably towards the end of a market cycle and there’s probably more market dislocation and opportunities that maybe some value-add managers can take advantage of, versus core managers,” Reinhardt explained.

When asked whether it has a preference for any sector-specific funds such as renewable energy or digital-focused, he responded: “[Fund policy states] we’re not allowed to consider ESG criteria so while we certainly don’t reject them out of hand, a renewable or green energy fund would have to compete on the same basis as other funds.”

IPERS has an 8.5 percent allocation to real assets, with a long-term target of an even split between real estate and other real assets, although infrastructure is expected to form the basis of this side of the allocation. While the Brookfield investment was IPERS’ first infrastructure equity commitment, the pension also earlier this year picked IFM’s US Infrastructure Debt Fund as part of its real assets credit search.