News Analysis: Targeting home turf can boost fundraising

Fiera Axium Infrastructure, which recently closed its debut fund on C$460m, found fundraising success by marrying Canadian infrastructure projects with capital from Canadian investors.

A recent final close by a Canadian first-time fund manager shows how targeting one’s home turf can ease investors into the sometimes-daunting infrastructure proposition. 

Last month, Fiera Axium, a 10-year closed-end fund established in 2008, closed its debut Canada infrastructure fund on C$460 million (€338 million; $472 million).  While it fell slightly shy of its stated target of C$500 million, the fund still more than doubled its 2010 first close of C$175 million during a difficult fundraising market.

Frédéric Brassard, vice president for corporate development and legal affairs at Fiera Axium, said the fund’s deliberate regional, Canadian focus was “very much welcome by the Canadian investor community and well-perceived as well overseas”. The firm spoke “very selectively” with investors in Europe and the US, but Brassard emphasised that the fund focused on raising capital from Canadian institutional investors who were just getting familiar with the infrastructure asset class.

“When you are familiarizing yourself with the asset class it’s much more comfortable to do so in your own market,” Brassard said. The investors in the fund include Canadian public and private pension plans and other “major institutional investors”  Fiera Axium previously said in a statement.

Brassard said these investors had been studying the decisions made by big Canadian pensions like the Ontario Municipal Employees Retirement System or the Canada Pension Plan Investment Board, each of which have developed large, direct investment programmes for infrastructure in the last decade. Fiera Axium gave them a way “to somewhat replicate in a much smaller scale what the leading institutional investors are doing overseas”, Brassard said.

Fiera Axium will help its limited partners replicate the success of the big Canadian pensions by giving them “a platform to do mid-market deals first in Canada”, with a specific focus on mid-market transport, energy and social infrastructure projects across the country, according to Brassard. He defined these as equity investments of C$20 million to C$50 million per project.

The fund invested in three such projects in 2010, and has recently bid on two more. The firm is also negotiating private-to-private deals that have yet to be finalized or disclosed, according to Brassard.

The investors in the fund include Canadian public and private pension plans and other “major institutional investors” Fiera Axium previously said in a statement.

“We were there to channel the willingness of Canadian institutional investors to put money to work in these mid-market infrastructure projects,” Brassard said.

The first year

Canada isn’t exactly a new market for institutional investors wanting to put money into large-scale infrastructure projects. Fiera Axium has been negotiating, with mixed success, the country’s well-developed public-private partnership (PPP) model, particularly in its native province of Québec.

“We’ve got a sizable portion already invested in the first year,” Brassard said, declining to give a specific percentage or amount. 

Last May, the fund closed on the Centre hospitalier de l’Universite’ de Montreal (CHUM) research centre PPP. Fiera Axium and its co-investors brought in 60 percent of the equity on the project, which has construction costs of about C$485 million. European infrastructure fund manager Meridiam contributed 40 percent.

The fund has recently bid on two more greenfield PPPs in Québec.

Last month, Fiera Axium was shortlisted to construct a 300-cell prison in southern Québec, pitting it against consortiums led by Macquarie and SNC-Lavalin. The winning consortium will manage and construct the infrastructure, at an estimated cost of C$143 million, but security of the prisoners will remain in government hands.

The other bid was not successful. A Fiera Axium-led consortium was shortlisted for the construction a 772-bed hospital complex at CHUM, but ultimately lost to a consortium of European companies, which will construct the project at an estimated cost of C$2.1 billion.

Brassard said secondary transactions, in which a fund acquires existing projects from a private operator, are a major part of Fiera Axium’s focus, and that the fund is working on a number of such deals. 

Late last year, another Canada-focused fund, the unlisted Macquarie Essential Asset Partnership, sold Fiera Axium its stakes in the British Columbia Sea-to-Sky highway project and a portion of the Edmonton ring road in Alberta. Financial details were not disclosed, but Brassard said at the time that that deal with Macquarie represented a larger investment for the fund than the investment in the CHUM research centre.

In the energy sector, Brassard said he saw opportunities in renewable energy and potentially biomass projects, particularly in British Columbia, Ontario and Québec.