Anthony Fasso

GII will invest in renewable energy infrastructure such as solar photovoltaic generation facilities across Japan, taking advantage of the growing demand for clean energy. Its first acquisition will be an operating, 2MW solar power generation facility located in Miyazaki prefecture.

AMP Capital will assist GII to acquire high quality assets as well as provide ongoing advice.

AMP Capital CEO International Anthony Fasso said: “AMP Capital has been investing in infrastructure globally for the past 25 years and we are delighted to extend our relationship with MUTB as an adviser on this exciting opportunity. We have expertise across a range of sectors from transport, such as airports, to power/utilities and already have a number of renewable energy assets in our infrastructure equity and debt portfolios worldwide.

“There has been a lot of focus on expanding the renewable energy sector as part of a shift in Japan towards such clean energy, and there is a growing need for funding for both brownfield and greenfield renewable energy projects. Providing long-term, stable funding into this area in order to support such change also has a significant community benefit.”

In the future, MUTB plans to offer Japanese institutional investors the opportunity to invest into these renewable assets through a fund vehicle. The target market will be local pension plans that are looking for investment opportunities providing stable cash flow and low correlation to traditional asset classes such as equities.

MUTB Executive Officer Osamu Hoshi said: “AMP Capital has a long history of investing in infrastructure and we are pleased to have them on this opportunity as advisers for GII. We look forward to working with AMP Capital as we look to bring it to market and expect to contribute to society as a stable funding provider in the renewable energy sector in the future.”

MUTB acquired a 15 per cent minority shareholding in AMP Capital in 2012. During the past two years, MUTB and AMP Capital have launched six retail funds and have worked closely to raise capital for AMP Capital’s Infrastructure Debt Fund II and Global Infrastructure Fund.

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Anthony Fasso

After several years of navigating high volatility and market uncertainty, the latest AMP Capital Institutional Investor Report reveals that institutional investors are now focussed on increasing returns for their clients.

The survey of global institutional investors, who manage a collective US$1.9 trillion, found respondents highlighted boosting returns as among their most pressing concerns (46 per cent) closely followed by reducing volatility (37 per cent) and reducing risk overall (31 per cent).

The largest proportion of respondents feel increasing the use of non-market driven strategies, such as absolute-return and inflation-plus instruments, would be especially effective ways to increase returns (48 per cent) and decrease portfolio risk (52 per cent) during the next 12 months. Increasing allocations to liquid or illiquid alternative assets was also cited as an especialy effective way to increase returns (46 per cent) or decrease risk (33 per cent).

When it came to likely shifts in asset allocation, alternatives again proved to be in favour. Thirty-five per cent of investors expected to increase their allocation to alternative assets as opposed to more traditional asset classes such as fixed income (22 per cent) or equities (19 per cent). Forty-two percent of respondents expected the size of their equities portoflios to decrease.

AMP Capital Chief Executive International and Head of Global Clients Anthony Fasso said: “In what is still a tepid recovery from the post-Lehman crisis, many fund managers are eager to reduce risk especially as their plans approach fully-funded status. This has led them to step away from publicly-traded markets and turn to alternative investments and liability-driven investment strategies as a means to shelter their plans from changes in asset value and interest rates.”

Regardless of this marked enthusiasm for alternatives, decision makers at pension and retirement plans do not expect a seismic shift in asset allocations during the next year, explaining that any 12-month period is too short for plans to initiate and execute dramatic asset allocation changes.

AMP Capital’s survey also found that where assets are being reallocated, this is more likely to be initiated by internal investment teams (44 per cent) compared to third-party investment advisers (19 per cent).

Mr Fasso said: “The majority (41 per cent) of those surveyed said that it would take their schemes three to four months to decide to change asset allocations and to develop a strategy to implement that change; however, 35 per cent said that it would take more than six months to do so. This is concerning as it implies that more than a third of schemes are not able to react quickly to market volatility.

“Investment decison makers at retirement plans recommend speeding up the decision-making process regarding asset allocation changes as well as making the process more independent from plans’ trustees and boards.”

Only 15 per cent of respondents said it took between one and two months to implement a strategy to change asset allocations.

AMP Capital asked respondents what they would most like to improve about the ways their schemes make decisions, especially regarding changing asset allocation, and received the following answers:

• “Decisions are made at the staff level regarding asset allocations [at our plan], but all decisions are approved at the Board level, and this process is slow and inflexible,” says the CIO of a North American pension plan with US$1 billion–$10 billion of assets under management.

• “Our investment committee currently meets four times a year, as required by law, so decision-making is slow,” notes a portfolio analyst at a mid-size pension plan in North America.

• “We should review asset allocations on an ongoing basis and adjust as warranted, as opposed to using a five-year study,” says the CIO of a North American pension plan with US$10 billion–$50 billion of assets under management.

• “We need to shorten the implementation time [after deciding to shift asset allocations],” states the CIO of a North American pension plan with US$1 billion–$10 billion of assets under management.

Click here for a full copy of the report.

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Anthony Fasso

AMP Capital has expanded its new Luxembourg-domiciled UCITS platform to make available UCITS versions of its Global Listed Infrastructure Fund and Global Real Estate Securities Fund to institutional investors in Asia.

The launch of the UCITS-compliant funds to Asian investors is part of AMP Capital’s long-term strategy to continue to grow its business in the region and follows other significant developments during the last 12 months such as the joint venture with China Life. In January, the joint venture announced its first fund, the China Life AMP Money Market Fund, raised a record US$2 billion during its IPO period.

Today’s announcement also marks the continued evolution of AMP Capital’s UCITS platform, which was launched in April 2014 with US$156 million in assets under management and targeting investors in the UK, the Netherlands and Luxembourg seeking pooled fund-access to AMP Capital’s global listed infrastructure and real estate capabilities. Asian investors will now also have access to these capabilities, which deploy the same investment approach and strategy as AMP Capital’s existing listed infrastructure and real estate funds, via the UCITS platform.

AMP Capital CEO International and Head of Global Clients Anthony Fasso said: “The extension of our UCITS platform to investors in Asia represents a milestone in AMP Capital’s development in the region. UCITS is the most common investment vehicle in Asia and in particular we see significant investor demand in Hong Kong and Singapore.

“Since the post-Lehman shock, Asian investors have been interested in strategies that provide sustainable income and capital growth, which both real estate and infrastructure can provide. By extending the reach of our UCITS platform, we can make the AMP Capital Global Listed Infrastructure Fund and the AMP Capital Global Real Estate Securities Fund available to a broader range of investors keen to take advantage of AMP Capital’s strong reputation and track record with these strategies.”

The AMP Capital Global Listed Infrastructure Fund and the AMP Capital Global Listed Real Estate Securities Fund both provide investors with access to a global portfolio of securities that are diversified across regions and sectors. The infrastructure fund has US$897 million in funds under management (as at 31 March 2014) and a three-year track record while the real estate fund has US$5.9 billion in funds under management (as at 31 March 2014) and a 12-year track record. The funds have investment professionals on the ground in cities such as Hong Kong, London, Chicago and Sydney.

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Institutional investors are curbing their enthusiasm.

Despite enjoying better-than-expected returns in 2013, institutional investors are significantly reining in their return expectations for 2014 and turning to alternative – and illiquid – asset classes alongside global equities, according to the latest AMP Capital Institutional Investor Report.

The survey of global institutional investors, who manage a collective US$2.4 trillion, found respondents’ portfolios returned on average 13 per cent in 2013. However, respondents see key risks to the global economy as stumbling blocks in achieving their investment returns for the year ahead. For the remainder of 2014, respondents expect to achieve average returns of 7.3 per cent.

Globally, respondents in Asia Pacific have the highest baseline and optimistic forecast for 2014 at 8.1 per cent and 12.1 per cent, respectively. Respondents from Europe and the Middle East have consistently lower forecasts on average than those of investors in Asia Pacific and also The Americas.

AMP Capital Chief Executive International and Head of Global Clients Anthony Fasso said: “Institutional investors enjoyed a stellar year in 2013 largely due to the bull market in equities around the world. Of those we surveyed, 93 per cent either met or exceeded their expectations. Allocations to domestic and international equities served investors well, with developed market equities performing better than those in emerging markets. However, investors’ planned allocation increases for the rest of 2014 are most pronounced in alternative assets especially in private equity and direct real estate and infrastructure. This is a continuation of the trend that we have highlighted in earlier issues of our Institutional Investor Report series.

“Looking ahead, investors have uncertain expectations. Their concerns are based around the risks they see to the global economy including the ongoing crisis in Ukraine, the end of quantitative easing by central banks and questions over the future direction of China’s economy. Despite this, the majority of investors surveyed expect to make no substantive change in their approach to seeking returns either through alpha strategies or by bearing more risk.”

Key findings from the survey include:

• Forty-five per cent of respondents expected to boost their holdings in private equity during the first half of 2014, more than a third (36 per cent) anticipate an increase in their allocation to direct real estate and almost a quarter (24 per cent) plan to boost their investment in direct infrastructure.

• Investors from Europe and the Middle East are most likely to increase their investment in direct real estate (59 per cent) and private equity investment (56 per cent). In the Americas, private equity (44 per cent) and direct real estate (22 per cent) allocations are expected to rise the most in respondents’ portfolios. Asia-Pacific investors expect to see the greatest rise in allocations to global equities (44 per cent).

• While institutional investors are continuing to increase allocations to alternative assets, the rise may be tempered as pension schemes, in particular, that are preparing to enter their drawdown phase may soon find themselves up against their governance limits for investing in illiquid assets. Two-thirds of investors have an average limit of 25 per cent on the proportion of illiquid assets they can hold and many already have an average allocation of 24 per cent.

• Thirty-one per cent of investors intend to move out of domestic equities, 26 per cent are decreasing their allocation to cash and 21 per cent said they would reduce the domestic fixed income portion of their portfolio.

• In Asia Pacific and in Europe and the Middle East, 29 per cent and 31 per cent of respondents, respectively, plan to decrease their holdings in domestic fixed income. In the Americas, 29 per cent of respondents primarily plan to decrease their allocations to domestic equities.

• Investors in the Americas have the greatest exposure to equities (on average 53 per cent), followed by Asia Pacific (46 per cent) then Europe and the Middle East (37 per cent).

• Average allocation to fixed income is highest in Europe and the Middle East (37 per cent) compared to Asia Pacific (21 per cent) and the Americas (20 per cent).

• Survey respondents have limited interest in considering environmental, social, and governance factors when making investment decisions despite evidence they add some value.

Click here for a full copy of the report.

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A UCITS (Undertakings for Collective Investment in Transferable Securities) platform is an investment vehicle that enables fund managers to more easily distribute their products across Europe and Asia to offshore investors. According to the European Fund and Asset Management Association, UCITS product structures represent 71 per cent of the total European funds management industry.

The platform has been launched with US$156 million in assets under management, which will be split equally between the two strategies.

The UCITS-compliant funds deploy the same investment approach and strategy as AMP Capital’s existing listed infrastructure and real estate funds. They have been added to the newly-launched UCITS platform following increasing demand from global institutional clients for pooled fund exposure to these capabilities. The funds will be available to investors in the UK, the Netherlands and Luxembourg initially, with plans to expand into other jurisdictions in Europe and Asia.

AMP Capital CEO International and Head of Global Clients Anthony Fasso said: “AMP Capital has more than 25 years’ experience investing in both real estate and infrastructure. The establishment of a UCITS platform is a key step in our continued commitment to further develop AMP Capital’s offering in Europe given UCITS is the dominant investment structure in this region. We are pleased to bring the AMP Capital Global Listed Infrastructure Fund and the AMP Capital Global Real Estate Securities Fund to a broader investment audience in response to investor demand.”

AMP Capital’s UK Institutional Director Louisa Yeoman added: “The launch of the UCITS platform with an initial focus on these two asset classes reflects the increase in allocations to alternatives, particularly real assets, by global institutional investors. We are in advanced discussions with a number of institutional investors to support this launch and anticipate continued momentum as investors increasingly look for investments with the potential for capital growth and predictable, consistent, yields. We plan to add further strategies to our UCITS platform over time.”

The AMP Capital Global Listed Infrastructure Fund and the AMP Capital Global Listed Real Estate Securities Fund both provide investors with access to a global portfolio of securities that are diversified across regions and sectors.

The infrastructure fund, which has US$897 million in funds under management (as at 31 March 2014) and a three-year track record, focuses on energy infrastructure (including electricity transmission and distribution, and oil and gas transportation and storage); transportation infrastructure (including toll roads, airports and ports); communications infrastructure (satellites and mobile communications towers) and water infrastructure. The investment team is located in London, Chicago and Sydney.

Meanwhile, the real estate fund provides access to a global portfolio of real estate investment trusts and listed property securities and is focused on Europe, the Americas and Asia Pacific. The fund has US$5.9 billion in funds under management (as at 31 March 2014) and a 12-year track record. Its investment team is located in London, Chicago, Hong Kong and Sydney.

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AMP’s new fund to invest in utility assets.

AMP Capital has attracted more than US$300 million from 17 institutional investors from Japan, United Kingdom, Korea, Switzerland and Australia, to complete the first close of the AMP Capital Infrastructure Debt Fund II (IDF II).

The fund will invest in the subordinated debt of infrastructure assets in the essential services of water, gas, electricity and transportation located in Europe, North America and Australia.

IDF II follows the success of AMP Capital’s first Infrastructure Debt Fund which closed to new investment in June 2012 after raising US$503 million from 30 global institutional investors.

AMP Capital Global Head of Infrastructure Debt Andrew Jones said there was great momentum in attracting new global investors to IDF II.

“Investors globally are seeking stable high cash yield, defensive and predictable investments and that’s why we’ve been so successful in attracting clients to IDF II,” Mr Jones said.

“We’ve also completed the Fund’s first investment, securing a £50 million subordinated loan to Heathrow Airport. The team is pursuing a strong pipeline of attractive investment opportunities and expect to announce further investments shortly.”

The portfolio is expected to consist of investments in the subordinated debt of 10 to 15 companies headquartered in OECD countries.

AMP Capital Chief Executive International and Head of Global Clients Anthony Fasso said: “We are very pleased to welcome new clients to AMP Capital, including one of the top insurance companies in South Korea. The broad interest we’ve seen from investors in the US, Asia, Australia and Europe – including attracting our first Swiss client – is testament to the compelling investment opportunity IDF II offers.

“This is also the first direct infrastructure fund that our business partner Mitsubishi UFJ Trust and Banking Corporation (MUTB) has marketed to their clients, with great success,” Mr Fasso said.

AMP Capital’s global infrastructure debt team has eight investment professionals located in London, New York and Sydney. As one of the first to launch a global infrastructure debt fund, the investment team has successfully invested more than US$1.8 billion (as at 30 June 2013) in 38 infrastructure debt assets since 2001.

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The survey of global institutional investors who manage a collective US$1.9 trillion revealed a net increase in allocations to alternative investments1 in Q1 2013.

Almost a third of survey respondents anticipated an increase in their allocation to alternatives in 2013 with listed and unlisted real estate and infrastructure making up one of the fastest growing segments.

Key findings

• Almost 40 per cent plan to increase their investments in direct/unlisted investments in 2013, suggesting investors are seeing private, direct investments as a source of attractive returns.

• Thirty-six per cent of respondents in Asia anticipate increasing their direct/unlisted investments in the year ahead, while 46 per cent of those in Europe and 38 per cent in the Americas foresee such a change.

• Real assets already play a substantial role in investors’ existing asset allocation strategies with 30 per cent holding more than 10 per cent in real assets. Asked whether they were likely to increase their allocations to real assets, 72 per cent of respondents said they would be most likely to increase investment in real estate, 56 per cent in infrastructure, 28 per cent in infrastructure debt and 17 per cent in commodities (with 22 per cent citing other real assets).

• 46 per cent of European investors expect to allocate more funds to real assets in 2013, compared with only 18 per cent in Asia and 28 per cent in the Americas. • Almost 50 per cent of these European respondents expect to invest in more direct, unlisted investments, focusing on infrastructure and infrastructure debt, whereas in Asia, respondents showed the greatest interest in real estate, infrastructure and infrastructure debt. • 32 per cent of survey respondents said they were more likely to expand into new asset classes – including infrastructure, private equity, real estate and renewable energy – when asked what structural changes they expect to make in the year ahead. Twenty-seven per cent said they expect to limit risk in various ways and 24 per cent expect to increase their roster of managers.

• There’s no sign the ‘great rotation’ from bonds to equities has eventuated amongst institutional investors with seventy-nine per cent of institutional investors polled replying that they had no plans to move out of cash and fixed income this year. Global and domestic government bond holdings were increased by 29 per cent and 28 per cent of respondents respectively in Q1 2013. Portfolio rebalancing in Europe will not come at the expense of cash or fixed income allocations and only 9 per cent of institutional investors in Europe plan to move out of cash or fixed income compared with 23 per cent in the Americas and 27 per cent in Asia.

• Institutional investors in Asia increased their investment in domestic government bonds, listed bond funds, global government bonds, mezzanine debt and other debt instruments in Q1 2013. This growth in fixed income allocations in Asia is likely to continue in the second quarter, while interest in direct/unlisted investment among respondents in Asia is comparable with respondents in Europe and the Americas.

AMP Capital Chief Executive International and Head of Global Clients Anthony Fasso said: “The trend for large institutional investors globally to increase their allocations to alternative asset classes is set to continue.

“This suggests that investors are seeing private, direct investments as an attractive source of alternative returns with less volatility than long-term equity and bond investments, despite the often illiquid nature of direct investments such as private equity, infrastructure and direct real estate,” he said.

“A rotation out of bonds and into equities has not been widely adopted among global institutional investors. Rather we see them moving out of cash and into both bond and equity investments, and making shifts within their fixed income investments by moving away from sovereign bonds and into high yield corporate debt,” Mr Fasso said. For a full copy of the report visit www.ampcapital.com/iir.

1 Listed real estate, direct real estate, listed infrastructure, direct infrastructure, infrastructure debt, private equity, hedge funds, commodities and cash.

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