CEFC has committed A$150 million to the new closed-ended fund, which aims to acquire core-plus-type assets such as hospitals, retirement housing, student accommodation, data centres and renewable energy assets.
Infrastructure Investor understands that CEFC is one of a group of institutional investors to have made commitments to the fund. Morrison & Co declined to name the other investors, the target rate of return, or disclose how much capital has been raised to date.
The manager also did not reveal the precise of term of the fund, but a source indicated that its life would be “more than 10 years”, longer than a typical private equity fund.
The Growth Infrastructure Fund will target assets with high-growth potential, Morrison & Co chief investment officer Paul Newfield said.
“The fund is focused on assets with traditional infrastructure characteristics, but those that are more exposed to particular growth drivers, like the ageing population, for example. These assets tend to offer expansion and development options that generate higher returns than you’d get from assets purchased through straightforward auction processes.
“There aren’t a lot of large, core infrastructure transactions happening in Australia right now, and there’s plenty of capital chasing those deals. In contrast, growth infrastructure assets that require proactive origination and active management are less competed and tend to offer more attractive returns in the current market.”
Morrison & Co’s Infratil fund has generated returns of approximately 17 percent per year since its inception in 1994 from a similar growth infrastructure-investment strategy.
The fund will be Australia-focused, Newfield said, but is also open to acquiring assets on a selective basis in other OECD countries including New Zealand, the US, Canada, the UK and other countries in Europe.
Catching up with real estate
Morrison & Co plans to introduce science-based targets to build a zero-emissions portfolio over time, making decarbonisation a key part of the fund’s strategy.
“Infrastructure is a big contributor to carbon emissions, and infrastructure managers have probably been less active in this space than some of the more advanced property managers,” Newfield said. “We believe decarbonisation of assets will enhance the risk-return profile and appeal to investors. It will also help us generate stronger returns as assets will be more attractive to end customers.”
The fund will also draw on Australian sustainability standards to set its goals, including those of the Infrastructure Sustainability Council of Australia, the National Australian Built Environment Rating System, and the Nationwide House Energy Rating Scheme.
CEFC chief executive Ian Learmonth said in a statement that its A$150 million investment showed how investors can “readily improve the way we build our essential and social economic infrastructure”.
“We see it as critical that new infrastructure assets are built to the highest possible clean energy standards, and that existing assets are updated with proven technologies that can lower emissions and cut energy use,” he added.
The Australian infrastructure sector currently accounts for around half of the nation’s greenhouse gas emissions, the CEFC said. The organisation invested A$150 million in IFM Investors’ Australian Infrastructure Fund, to support emissions reduction and energy-efficiency initiatives across that portfolio.