Weisdorf sees shift to value-add

“The market appears to be ready for value-add strategies,” asserts Mark Weisdorf, giving clues as to the nature of the opportunity likely to be targeted by his new infrastructure investment firm which is currently in discussions with possible cornerstone backers.

Much of the talk, particularly in Europe, has been around the hunger for core assets as investors flee from low returns in fixed income. However, the energy revolution in North America has brought with it opportunity for infrastructure specialists to get involved at an earlier stage, and target returns in the mid-teens or even higher.

“You have investors in core and core-plus that have been there for five or 10 years and now they’re experienced enough to consider adding a higher-return strategy,” says Weisdorf. “They may not want greenfield risk per se, but where there is a power purchase agreement (PPA), a reliable developer and a sustainable opportunity – such as supplying natural gas to communities that have only previously had heating oil, which is much more expensive – they will be prepared to take that kind of asymmetric risk.”

He adds that some investors with a $1 billion infrastructure portfolio are now considering – particularly in light of the pressure on returns in the core and core-plus space – putting $100 or $200 million of it towards value-added strategies. He also points out that funds targeting North America may benefit disproportionately since many investors believe their portfolios are underweight in the region.

Weisdorf, who is currently talking to potential team members that he has worked with in some capacity before, is engaging with possible cornerstone investors. He is planning to move from discussions with a small group of cornerstone investors to growing interest in the strategy next year, with a first close penciled in for the first half and a final close at the end of 2015, or beginning of 2016.

Weisdorf left the J.P. Morgan Infrastructure Investments Group, which he launched and where he had served as chief executive officer, in July. He had previously been instrumental in the launch of the private markets group at the Canada Pension Plan Investment Board.