Q: When did TMF Group begin its service offering in infrastructure investments – and why?
TMF Group: TMF Group was established in the Netherlands in 1988. Today, it operates as a single firm with 120 offices in more than 80 countries, supported by the expertise of 6,000 employees.
We became involved in servicing for infrastructure investments in 2009. One of our larger clients launched a €2 billion fundraising for their first unlisted infrastructure fund. This fund was initially targeting assets in five different European Union countries, and TMF Group provided central administration for the fund’s acquisition and holding structure in each of the respective jurisdictions.
Q: How has your infrastructure service offering grown over the years? And how does this growth compare to other business lines like private equity or real estate?
TMF Group: Since 2009, a growing number of TMF Group clients have begun investing in infrastructure. Given the popularity of consortium deals, we have been able to leverage off our existing client base to build new, organic relationships with their co-investors.
In terms of growth, our target allocation of institutional investors to infrastructure assets is still below that of, say, real estate or private equity. Nonetheless, our infrastructure investment services have achieved more impressive growth.
This growth is partly underpinned by the nature of infrastructure deals. They tend to be larger and longer term investments, often involving third-party debt. As a result, infrastructure investment is more likely to go hand-in-hand with complex administration requirements including mandatory audits, IFRS reporting and consolidated financial results.
As asset managers continually aim to simplify their operating model and rationalise costs, partnering with a single global service provider offers noteworthy advantages. In particular, infrastructure investors enjoy a single point of contact that can globally coordinate the reporting process.
Q: Fund administrators have traditionally been different from special purpose vehicle (SPV) administration providers, but TMF Group provides both services. That’s unique. What was the rationale behind this? And do you believe it gives TMF Group a competitive advantage?
TMF Group: The market is certainly still quite fragmented, and the largest fund administrators often have very limited global trust and corporate services. But the landscape is changing. This is especially the case within the alternative investments industry, which is rapidly consolidating.
While TMF Group has a fully integrated global platform for SPV administration, our fund administration services are currently limited to one of the most attractive fund jurisdictions – Luxembourg. However global asset managers are increasingly looking for a corporate services provider that is truly vertically integrated – and able to provide a one-stop shop for global administration services.
Having a single global service provider that covers all jurisdictions is the key aspect many clients are looking for; we also have a growing number of clients operating in countries where our competitors are not even present. This definitely gives TMF Group a competitive edge.
Q: You specialise in SPV administration. What are the main challenges in creating and administering these vehicles? And how do you navigate multi-jurisdictional complexity?
TMF Group: Operating internationally always brings added complexity, risk and cost. We have developed a global target operating model to assist with consistent service delivery.
This is supported at every level – by implementing the same technology, internal controls and procedures. The bottom line is that each multi-jurisdictional client enjoys the reassurance that TMF Group assists them in meeting their SPV’s statutory, regulatory, banking, investor and any other requirements through the appointment of a designated relationship manager.
Each TMF Group relationship manager is responsible for coordinating the relevant service delivery teams comprising of qualified accounting, legal and payroll professionals.
Regulatory requirements vary across jurisdictions; we streamline multi-jurisdictional complexities with our global reach and local knowledge, which allows our clients to focus on their core competencies.
Q: How does TMF Group add value for infrastructure investors? Is your involvement limited to ‘back office’ administration?
TMF Group: Our core business centres on taking care of back office administration. We also have specialist teams with industry knowledge that can add significant value to front office initiatives.
For example, with streamlining the asset bid process. We have clients operating from London, who may simultaneously be bidding on an energy asset, an airport or a toll road. The client invariably faces significant time pressure to have the bids prepared and lodged on time. Debt facilities may need to be entered into, and the banking consortium want all the KYC [know your customer] completed in advance. Multiple new entities may need to be incorporated, each in a different jurisdiction. Our clients save significant time and money by instructing their TMF Group relationship manager to manage these matters.
Q: On the project side, much has been made of the so-called ‘project agent’ role, especially with the rise of project bonds. What services does TMF Group offer when it comes to cash management, loan facilities and bank reporting?
TMF Group: Investors are increasingly attracted to the higher yield and steady long-term cash flows of infrastructure debt. However, project finance transactions come with enhanced requirements in terms of the level of detail provided to investors. This creates a need for a proactive third party to assist with obtaining and delivering all the relevant information in a timely manner.
Project decisions often need to be made quickly. As a result, the market is increasingly looking to agents, who understand which decisions can be made without bondholders’ consent – and conversely, recognise those where consent is required.
In terms of the loan facility role, the market requires a friendly inter-creditor party who is independent but can understand the deal and the culture of the various lenders and sponsors. It must understand how each institution makes decisions, thus going further than a traditional loan agent, being critically committed to the life of the deal.
As each deal is bespoke, our award-winning loan administration services can be flexible. We provide complex cash management solutions and reporting services, coupled with loan facility services staffed by experienced professionals.
Q: Looking ahead, what are your plans for expanding your services in infrastructure? Do you plan to introduce new products? And how do you envisage your team growing?
TMF Group: Our infrastructure services are expected to grow further. A number of TMF Group’s largest clients have recently raised new funds, and already we support four out of the world’s top 10 global infrastructure managers.
It’s no secret the regulatory environment is continually evolving and this creates opportunity for product development. The European Alternative Investment Fund Managers Directive (AIFMD) for instance, led to the creation of our depository services. And when the US introduced the Foreign Account Tax Compliance Act (FATCA) regime we had to assist our clients with classification and subsequent reporting where applicable.
Similar to FATCA, TMF Group is now working on tailored services with respect to the OECD’s Common Reporting Standard (CRS), and supporting clients with the impacts of the Base Erosion and Profit Shifting (BEPS) project.