Julian Robertson, the hedge fund manager famous for consistently beating out the S&P 500 for his investors for nearly two decades, believes infrastructure will be a winning investment theme for decades to come.
Robertson won fame in professional investment circles by achieving an average annual return of 31.7 percent for investors in his Tiger Management Corporation between its inception in May 1980 and its peak August 1998. During that same time, the S&P 500 index returned only a 12.7 percent annual return, according to a recent chronology of the hedge fund industry by financial writer Sebastian Mallaby.
I think the environment will force a big move towards infrastructure investing
Robertson is now setting his sights on infrastructure, widely acknowledged to be a lower-return asset class than equities, because of two long-term trends.
First, there’s the issue of global warming – the gradual rising of the earth’s temperature because of carbon emissions from human activities – which Robertson believes will drive a greater need for investing in the asset class.
Secondly, Robertson believes inflation will seriously impact industrialised countries that have pursued expansionary monetary policies, such as the United States.
Name me a large country that has gone out of a serious recession by printing money and show me who hasn't had inflation
“Name me a large country that has gone out of a serious recession by printing money and show me who hasn’t had inflation. It’s just, it’s an oxymoron,” Robertson said. Given infrastructure’s ability to serve as an inflation hedge, he sees a role for it in his portfolio.
But, Robertson cautions, “always better the person than the idea”, which is why he spent a lot more time probing the individual investor he backed than the asset class as a whole. In November 2009, Robertson announced he’d seeded infrastructure private equity firm, Tiger Infrastructure Partners, to make investments in the asset class.
“It’s quite a departure from our normal thing,” Robertson said, pointing out that he usually seeds hedge funds. “And it wouldn’t have happened, you know, just with an ordinary guy,” he said of Emil Henry, Tiger Infrastructure’s managing partner.
In the February 2011 edition of Infrastructure Investor magazine, Robertson details how he ended up selecting Henry and his team of former Lehman Brothers executives as his partners for investing in the asset class.
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