UTA ousts Hastings, hires Morrison to run $4.7bn portfolio

The New Zealand fund manager beat IFM, winning the right to manage one of the oldest and largest infrastructure funds in Australia.

After a months-long tender process, the board of Utilities Trust of Australia has selected New Zealand-based alternative asset manager Morrison & Co to manage its A$6 billion ($4.69 billion; €3.82 billion) open-ended infrastructure vehicle, which is currently managed by Australian fund manager Hastings.

The formal transition to Morrison & Co is expected to occur on 1 July, following an extraordinary general meeting vote by UTA unit holders, UTA chair Rob Jolly said in a statement.

The tender process started in December last year, reportedly due to UTA investors’ disappointment with Hastings’ owner Westpac and its two botched attempts to sell the Australian fund manager, as previously reported by Infrastructure Investor.

The UTA portfolio, which currently comprises 12 assets in Australia, Europe and the US, and includes airports in Perth and Melbourne, as well as New South Wales’ energy distributor TransGrid, will be overseen by Morrison & Co’s chief investment officer Paul Newfield and his team, sources familiar with the matter told Infrastructure Investor.  The focus in the near term will be to drive asset performance, these sources added.

It is understood that up to seven parties, including domestic and global fund managers, were invited to submit first round proposals, with Australian fund manager IFM Investors and Morrison & Co making it to the final round, according to these same sources.

“The board is confident that the combination of a high-quality portfolio and the stability afforded by an experienced, well-regarded infrastructure manager will be an attractive proposition for both existing and new investors,” UTA chair Rob Jolly, said in a statement. He added that the terms have been “materially improved” for UTA investors, but did not elaborate further.

Details of the management rights contract were not disclosed. Morrison & Co declined to comment while UTA and Hastings had not responded to queries by press time.

Established in 1994, UTA is one of Australia’s first and largest infrastructure funds, with more than A$6 billion in assets under management, including invested capital and undrawn commitments. Investing in low-risk core infrastructure assets, the fund has been delivering a net return of 11.84 percent per annum across 23 years to end of June 2017, UTA said.

UTA accounted for over 40 percent of Hastings’ capital under management, which stood at A$14.3 billion as of end of June last year. Another Hastings-managed vehicle – The Infrastructure Fund – decided to drop Hastings as the manager of its A$2.4 billion portfolio in August 2017, after 17 years of management. The board of TIF is considering future options such as a reduced role of Hastings, use of other managers and potential internalisation, during a 12-month transitional period.

UK manager Northill Capital clinched a deal late last year to acquire the UK and US assets of Hastings, after first trying to acquire it whole.

Morrison & Co, for its part, entered the Australian market in 1994, after its establishment in New Zealand in 1988. It invests across infrastructure and property in both private and listed markets. Including the UTA, total assets under management by Morrison & Co will stand at A$15 billion.