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Strategy shifts in the digital age

Enhanced reporting is holding fund managers which tweak their mandates en route increasingly accountable. For investors seeking clarity, that’s probably a good thing.

It’s never easy time-proofing news coverage when you’re in the media business. In the age of social media, it doesn’t take much for information to go stale. The challenge gets even greater when, like us at Infrastructure Investor, you seek to encapsulate shifting market trends in a monthly magazine.

Yet even by such standards the speed at which our December/January cover became passé is remarkable. As we reported this week, that issue was still on the shelves when Ben Loomes, one half of the 3i Infrastructure leading duo adorning the magazine’s front cover, left the London-listed firm. The unit is now being led solely by Phil White, a 10-year veteran at the company’s infrastructure franchise.

3i declined to comment on the reasons behind Loomes’ move and it did not confirm whether it would seek to hire another co-head, citing restrictions on what it could disclose under the agreement between itself and its former employee. All chief executive Simon Borrows could say in a discrete statement entitled “Organisational change” was to thank Loomes for “his many accomplishments and hard work”.

We wouldn’t want to speculate on the circumstances behind Loomes’ departure, but its awkward timing suggests it caught 3i somewhat wrong-footed. Just weeks before the event, the firm went on the record to explain that the idea of having two heads was a popular one at 3i, with duos also at the helm of its private equity and debt management businesses. “It may be unusual for some asset managers, but it's not unusual for 3i,” Loomes himself said then. Either the firm learnt about what was coming rather late in the process, or it’s changed its mind about the virtues of co-leadership.

That wouldn’t be the first time this has happened at 3i Infrastructure, which in the last few years has ventured away from classic core assets towards the core-plus end of the market, broadening its return target in the process. And it is not the only recent example of a strategy update that is somewhat at odds with what fund managers had previously told us.

When BlackRock infrastructure chief Jim Barry spoke to us about the firm’s acquisition of First Reserve’s infrastructure unit last month, he said the move was underpinned by his team’s willingness to move up the risk curve and target assets capable of generating mid-teen returns. As the world’s largest manager seeks to expand its infrastructure offering, the move is understandable. But we couldn’t help notice that it comes less than a year after Barry told us: “The challenge is people talking the language of low risk and then going up the risk spectrum.”

When the UK’s Pensions Infrastructure Platform announced a 30MW solar deal on Tuesday, it noted that the assets would be purchased by its Multi-Strategy Infrastructure Fund, a vehicle it launched in March 2016 with a £1 billion ($1.24 billion; €1.18 billion) target. PiP itself was founded, let’s not forget, to bring scale to UK pension investment in UK infrastructure. Yet its press release this week says the vehicle is now targeting £600 million, although PiP did not confirm if and when its target was revised before press time.

This is not to say that fund managers making announcements that slightly conflict with their original declarations were dishonest the first time round. Market dynamics often demand swift adjustments. Neither do we want to judge strategy shifts in and of themselves: 3i seems to have done pretty well out of its move to core-plus so far, and BlackRock’s swoop on First Reserve appears in line with the firm’s growth ambitions.

What these stories demonstrate, rather, is that there is now a growing amount of literature on the asset class that gives its practitioners the tools they need to assess managers’ strategies against what was initially promised. That’s good practice for journalists – and a definite bonus for LPs in search of greater transparency.

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