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QIC used hybrid structure to entice LPs in global fund

The Australian fund manager combined attributes of both open-ended and closed-ended structures in its debut infrastructure co-mingled offering, which closed earlier this month on A$2.35bn.

Innovation was one of the factors that helped QIC bring its maiden global infrastructure fund to a A$2.35 billion ($1.79 billion; €1.69 billion) final close, according to the Brisbane-based asset manager.
Speaking to Infrastructure Investor, head of infrastructure Ross Israel explained that the firm combined attributes of opposite structures to tailor the offering to investor demands.
“We have worked through the two ends of the spectrum – the fully open-ended and the closed-ended structures. Our fund is a hybrid, which allows investors once fully invested to be insulated from their stakes being diluted,” he said.

The fund's investment period can be extended, with the number of extensions to be decided by an investor vote as long as a majority agree. Each extension lasts a minimum eight years, Israel said. The vehicle itself does not have a fixed tenure: once the investment period terminates, the fund will hold the assets indefinitely, or until investors decide to divest.
“Unlike other open-ended funds, QGIF's asset portfolio is fixed after its investment period and unlikely to significantly change. Understanding at that point what the fund's assets are enables investors to build out their future portfolio having regard for QGIF's strategy.”
The vehicle, which reached its final milestone last week after more than two years in the market, had an initial target of A$1.75 billion. Israel said the fund is aiming for returns in the low teens and is tilted to the Australian market, with the remainder to be deployed in Europe and North America.
The vehicle is also currently scouting the US and the UK for energy investment opportunities. Israel said A$500 million in co-investment capital has already been disbursed alongside the fund, which has backed three assets since reaching a A$875 million first close in August 2015.
These include EnergyAustralia's Lochard Energy, which owns and operates the Iona Gas Plant; a tie-up with local utility AGL and sovereign vehicle Future Fund to support the development of 1GW of renewables; and the A$9.7 billion lease of Port of Melbourne.
QIC is a shareholder of the UK's Thames Water, a large chunk of which was sold by Macquarie Group to Borealis Infrastructure and Wren House Infrastructure Management earlier this week.