Macquarie Asia II pushes New Mexico SIC closer to infra target

The New Mexico State Investment Council has approved a $75 million commitment to Macquarie Asia Infrastructure Fund II, a vehicle the Australian fund manager is in the process of raising.

MIRA is targeting net returns between 13 percent and 16 percent for MAIF II and has already invested in three assets worth a combined $750 million, NMSIC spokesman Charles Wollmann told Infrastructure Investor.

“Anytime we can see how they’re populating the fund with assets, gives us more to assess what expectations should be,” Wollmann explained.

MAIF II has a similar investment strategy to its predecessor, focusing investments in six Asian countries – China, India, South Korea, Australia, Japan and the Philippines – and in sectors including energy and renewables, transportation, water and waste management. It has a final target of $3.25 billion and as at last December had reached $2.96 billion, according to an SEC filing.

New Mexico’s commitment follows $100 million it allocated to MIRA’s first Asia infrastructure fund, which closed in February 2016 on $2.3 billion. Wollmann said that fund is generating an internal rate of return topping 7 percent, adding its vintage is still in the “early days”.

“They’ve exited the J-curve, but that’s still having an impact. Start-up costs are still having an impact,” he said.

NMSIC has been investing in real assets since 2011 including infrastructure, agriculture, commodities, energy and timber. Its commitment to MAIF II brings the endowment’s total infrastructure allocation to $690 million. This represents 35.2 percent of up to a 40 percent target within the real assets portfolio, which as at 30 September stood at $2.1 billion. NMSIC’s target allocation for real assets is nine percent of its total portfolio.

The endowment plans to continue investing around $100 million a year in the infrastructure sector for the next few years, Wollmann said. “Cashflows and investments of this nature that deliver income have been attractive in developing this portfolio, and we continue to think that’s a good way to go, given valuations in the broader public markets,” he added.

NMSIC is not planning new commitments to agriculture and timber in the near term, as both portfolios have been “fully built-out”, according to SIC’s annual investment plan for 2018.

Headquartered in Santa Fe, the SIC is a professional institutional investment organisation, which manages and invests New Mexico’s four permanent funds; the Land Grant Permanent Fund, the Severance Tax Permanent Fund, the Tobacco Settlement Fund, and the Water Trust Fund. As at 31 December, SIC’s assets under management totalled $22.6 billion.