This latest fundraise is bigger than previous ones – why is that?
GF: Right now we have three assets in which we expect to invest in over the course of the next few months. The first is an offshore transmission asset, the second is a further investment in schools being developed under the Building Schools for the Future (BSF) programme, and the third is the new education ministry building in Berlin.
These three opportunities total around £170 million (€212 million; $264 million) so we are aiming to match the opportunities we’ve got with the capital we need.
Do you always do targeted fundraises like this?
GF: Yes. We raise money, invest it, demonstrate the returns we can create and prove the case as to why the investment made sense. If we’ve done that, we have proved to investors that we are good stewards of money and at that stage you can go back and invite investors to subscribe more capital.
You have to always prove performance.
You had a bumper deal year in 2011 – what’s the story behind that?
GF: We invested over £120 million in 2011 but we only invested £4 million in 2010. It was just that we saw more opportunities in 2011. As an investor, you have to be prepared at times not to invest when you don’t see the value and just concentrate on portfolio management. At other times, you say ‘there’s fantastic value here, it’s a great opportunity to invest, let’s go for it’ – and 2011 was more like that.
What balance are you aiming to strike as you grow your portfolio?
GF: I think we are reasonably ambivalent regarding sectors. We look more at risk and as long as we have broadly homogenous risk profiles across our different assets, I think we’d be fairly neutral between sectors.
With geographies it is a bit different. A few years ago, we were investing heavily in the Australian market. We saw some good opportunities in Australia and the exchange rate was very favourable at the time. We have benefitted from that because we have seen some significant gains as the Australian dollar has risen. But of course right now, that makes new Australian dollar investments look quite expensive.
So probably in the short term I would see us doing more deals in the UK and possibly in places like Germany.
All your assets have a similar, availability-type risk profile – does that worry you?
GF: No. The asset class is ultimately government-backed, so government risk is as much a concern for us as if you would have a portfolio of government bonds. If you don’t believe in governments, you shouldn’t be investing.
What is the role of investment adviser Amber?
GF: Amber was formed three years ago and there are essentially two parts to the business. First of all, we are investment managers and advisers, so we look after the assets in which our customers have invested. Our main investment fund is INPP, but we’ve also got three other smaller funds we manage, which are mainly invested into by the European Investment Bank.
The second element of our business concerns the origination of opportunities. If you look at many other funds in the market, they are acquiring assets through public auctions. That is not our main focus: virtually all of the assets in INPP have been developed by Amber or otherwise originated by us.
What’s your approach to asset management?
GF: We tend to own majority stakes in most of our assets, which means we are managing the relationship with our counterparties. We have a team of asset managers who are very focused on managing the interfaces with the public sector, debt providers and so on, but also on making sure projects run smoothly.
If you detect problems early on you can deal with them straight away, whereas if you ignore them they tend to grow. We see that a lot of people in the sector are passive financial investors. We believe we have a more active approach and that means we can offer less risk to our investors.