RBC launches infrastructure investment group

Joe Lyons, Matthew McPhee and Whit Porter, founding principals of Macadam Asset Management, are leading the Boston-based group, which will offer institutional investors fund of fund, co-investment and secondary investment strategies.

The Royal Bank of Canada has launched an infrastructure investment group whose founding members include a team of investment professionals who were looking to create a new infrastructure fund of funds, according to a person familiar with the new group.

Joe Lyons, Nancy Mangraviti, Matthew McPhee and Whit Porter joined RBC’s Global Asset Management division last month to head the Boston-based group, which will offer institutional investors fund of fund, co-investment and secondary investment strategies for unlisted infrastructure funds.

They are gearing to launch investment products for these strategies by the end of the first quarter, according to the person.

Joe Lyons

Lyons, McPhee and Porter were founding principals of Macadam Asset Management, a firm they launched last year with the goal of creating a $300 million global infrastructure fund of funds, as previously reported by InfrastructureInvestor.
 
Mangraviti, the fourth founding member of RBC's infrastructure investment group, joined RBC from Bank of America, where she was a legal counsel in the asset management group.

The team's appointment at RBC underscores growing institutional investor interest in infrastructure and a continued interest in a fund of funds investment strategy for the asset class. Unlike direct investment funds, which find and invest in assets, these funds raise capital from institutional investors to commit to infrastructure fund managers.

Arguments for a fund of funds strategy in infrastructrure focus on the benefit of better management selection and investment diversification. Sceptics in the industry believe infrastructure funds of funds are not viable because of burdensome levels of fees that could reduce the already-reduced level of expected returns from infrastructure assets.

Despite this, a flurry of firms launched forays into fund of funds strategies for infrastructure last year.

Australia’s Macquarie Group, a longtime manager of infrastructure assets, began marketing two infrastructure fund of funds – one weighted toward core and another weighted toward opportunistic, or higher-return infrastructure investment opportunities.

UBS launched an infrastructure fund of funds under the umbrella of its Alternative Funds Advisory group in Zurich.

London-based asset manager Pantheon also launched its first infrastructure fund of funds, which held a first close on $150 million in September. And Swiss alternative asset manager Horizon21 has previously said it would look to launching a second infrastructure fund of funds in 2010.

Against this backdrop, Lyons and his partners had been working to launch their infrastructure funds of funds throughout 2009. When interviewed by InfrastructureInvestor in April, they said they were looking for a business partner and seed investor. In December, they found that partner RBC Global Asset Management.

Lyons left his position as president of State Street Global Advisors in 2008 to work on Macadam. He was joined by McPhee, formerly the head of global fundamental strategies at State Street, and Porter, formerly a vice president at Macquarie Capital Funds in Boston.

RBC Global Asset Management is the institutional investment arm of Canadian investment bank RBC. The firm manages approximately $187 billion in assets in the US and Canada across all of its subsidiaries.