Specialist alternative asset manager Infrastructure Partners Investment Fund (IPIF) has appointed Kurt Lemke as the Head of Research and Portfolio Construction.

Mr Lemke has 20 years of experience in the financial services industry, including more than a decade in unlisted investment and economic forecasting.

Prior to joining IPIF Mr. Lemke was Group Director at Hasting Funds Management where he led portfolio construction and strategy.

IPIF, through the appointment of Mr Lemke, aims to lead the unlisted infrastructure investment market away from largely subjective decision-making processes to a more quantitative-based approach.

Commenting on the hire, IPIF Chief Executive Officer, Nicole Connolly, said: “We are excited to have Kurt come on board with us. He brings a wealth of experience and will be at the forefront of portfolio construction and research for IPIF and our investors.

“IPIF seeks to help better educate non-institutional investors about unlisted infrastructure and where it fits in their asset allocation and portfolio construction. This is more important than ever given the uncertain market outlook and surging equity markets.”

Ms Connolly added: “Unlisted infrastructure assets and portfolios are also known to be resilient throughout economic cycles, even shocks such as the GFC, due to inelastic demand for essential services – making them extremely attractive investments given ongoing uncertainties in domestic and global economies.”

IPIF is a leader in enabling self-managed super funds and high net worth individuals to access the unlisted infrastructure asset class, which has traditionally only been accessible to larger institutional investors.

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A rating of Very Strong is the second highest rating on the investment rating scale used by Australia Rating. A Very Strong investment rating indicates a very strong conviction that the Fund can deliver a risk-adjusted return in line with the Fund’s investment objective.

The Infrastructure Partners Investment Fund – Core is managed by IPIF Management Pty Limited, founded by Nicole Connolly in 2014. The Fund is a unique offering providing investors exposure – through a Fund of Fund (FoF) structure – to a well-diversified portfolio of unlisted infrastructure assets featuring Australia’s major airports (including Perth, Melbourne, Adelaide, Brisbane, etc.), TransGrid, South East Water and the Sydney Desalination Plant among other investments. Due to their size, such assets are typically only accessible to large institutional investors such as pooled superannuation funds.

Since its inception, the Fund has focused on investing in well-established unlisted infrastructure funds and building an exposure to mature, cash-generating assets with a balanced mix of regulated and inflation linked investments. Australia Ratings’ analyst, Dragana Timotijevic, said “The rating reflects the quality of the underlying assets and IPIF Management Limited’s expertise in managing unlisted infrastructure investments.”

She added “the rating also indicates the high level of confidence Australia Ratings has that the Fund will continue to deliver a stable and uncorrelated return relative to equity markets”.

The Fund makes semi-annual distributions, targeting net of fees returns of 3.5% over the 10 Year Government Bond Rate. As at August 31 2019, the Fund had around $133mn funds under management.

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Nicole Connolly

Specialist unlisted infrastructure fund manager, Infrastructure Partners Investment Fund (IPIF) has announced a $100 million capital raising that will enable smaller investors to access an asset class that is increasingly successful with institutional investors and industry funds.

IPIF will use the proceeds from the raising to fund immediate opportunities in two existing investments and expand the range of unlisted infrastructure assets in its flagship fund, IPIF Core. It has also just added a fourth unlisted infrastructure fund to its investment portfolio.

The fund already invests in assets including Adelaide, Brisbane, Cairns, Melbourne and Perth airports; Interlink Roads and a number of energy and utilities assets including ElectraNet, First Gas (NZ), Phoenix Natural Gas (UK), PowerCo (NZ), Sydney Desalination Plant and TransGrid.

IPIF Core was designed specifically to bring institutional-grade assets to private investors, high net worth individuals (HNWIs), self-manager super funds (SMSF) and other smaller sophisticated investors. It is the only multi-manager platform that provides individual investors with access to the unlisted infrastructure asset class.

Existing investors are prioritised to participate in the capital raise, as well as allowing for potential new investors in the fund. It is expected to close by mid-September.

IPIF Founder and CEO, Nicole Connolly, said demand for the fund and its reliable and consistent income yield had been strong, given the critical nature of infrastructure assets to the economy, “Infrastructure in a portfolio sits between government bonds and equities in terms of risk and return, making it an excellent portfolio diversifier and source of consistent income.”

“This capital raising gives us the opportunity to respond to recent high levels of investor demand for access to this attractive asset class,” Ms Connolly said. Interest had been particularly strong from HNWIs and SMSF trustees, financial planners and wealth managers.

IPIF Core has delivered performance of 7.9% a year since inception in January 2016.

IPIF also recently announced two new appointments, including Jonathan van Rooyen as Chief Investment Officer, and Sean Kim as Senior Investment Analyst.

The capital raising and new appointments caps of what is already a big year for the Manager, andcomes on the back of Ms Connolly being named as a Finalist in the Women in Finance Awards for Entrepreneur of the Year.

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Jonathan van Rooyen has been appointed Chief Investment Officer of IPIF and will be responsible for the IPIF Core fund investments, as well as new  business opportunities.

He was previously Executive Director and Portfolio Manager at Hastings Funds Management, where he was responsible for establishing the firm’s Asia footprint. He also managed Hasting’s $2.6 billion unlisted infrastructure fund, which owns stakes in the Cairns, Gold Coast and Perth airports, the Port of Newcastle and the recently privatised NSW land titles registry business. Prior to that, he was Executive Director (Partner) at KPMG.  Jonathan has also been a non-executive director of Queensland Airports, Envirogen, Interlink and Statewide Roads as part of his roles at Hastings.

Sean Kim has been appointed as Senior Investment Analyst. He was previously a senior associate at Hastings Funds Management. Prior to that he was a senior analyst at National Australia Bank, and a corporate tax associate at KPMG in Singapore.

IPIF is the only multi-manager platform for self-managed super funds and high net worth individuals to access the unlisted infrastructure asset class.

In welcoming the appointments, IPIF Founder and Chief Executive Officer, Nicole Connolly, said: “Demand for the IPIF Core fund and its reliable and consistent income yield has been strong, given the essential nature of infrastructure assets. Demand has been particularly strong from high net worth private investors as well as SMSF trustees, financial planners and wealth managers.”

The new appointments caps of what is already a big year for the Manager, and comes on the back of Ms Connolly being named as a Finalist in the Women in Finance Awards for Entrepreneur of the Year.
IPIF Core currently has $135m in AUM.

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Nicole Connolly

Sophisticated investors increased their exposure to unlisted assets last year in their quest for more consistent returns, resulting into record capital flowing into infrastructure funds.

Investors allocated US$85 billion to unlisted infrastructure funds last year, up $10bn on 2017, according to Preqin. This was the third annual record amount of investment in the asset class, notes Infrastructure Partners Investment Fund Management Pty Ltd (IPIFM).

This year is expected to be another bumper year for infrastructure investment, with Preqin forecasting the amount invested in unlisted infrastructure funds to rise a further 10%.

Investors like unlisted infrastructure’s diversification, inflation-hedging and income stream potential, especially given the concerns many investors have about a prospective market downturn, notes the independent IPIF.

“Australia’s larger industry superannuation funds have invested in unlisted infrastructure since the mid-1990s, accessing the benefits and diversification provided by these real and reliable income generating assets,” says Nicole Connolly, Executive Director of IPIFM.

In contrast, she says “the nation’s smaller institutional investors, high net worth individuals (HNWIs) and close to 600,000 SMSFs have traditionally been excluded from this market”.

However, she notes that volatile equity markets coupled with low interest rates and term deposits are prompting smaller investors to seek new ways to generate returns, beyond their traditional allocation concentration to Australian equities, cash and property.

“And this is extending to unlisted infrastructure. Infrastructure, and particularly unlisted infrastructure is attractive due to its typically stable, reliable returns and low correlation to equities.

“Infrastructure in a portfolio sits between government bonds and equities in terms of risk return, making it an excellent portfolio diversifier,” she says (and as shown below).

“Infrastructure’s potential for stable, reliable income and capital growth is derived from long-term, stable and predictable cash flows, typically underpinned by long-term contracts or a regulated asset base; with high visibility of income and revenues often linked to inflation,” she says.

This is one reason why unlisted infrastructure investments accounts for between 7- 12% of major institutional investor portfolios, with the Future Fund having some 7% allocated to infrastructure and Australian Super 12%, as at the end of 2017.

Why the increase in investor demand?

Ms Connolly notes unlisted infrastructure is renowned for its ability to provide consistent, reliable long-term income AND capital gains through the stable and predictable cash flows from diversified assets such as airports, seaports, power generation utilities and more.

“Total returns have historically returned 9% plus a year. This is more than the yields from Australia’s top dividend stocks of the big four banks and well above the rates of term deposits. Couple this with the recent uncertainty over the future of franking credits and dividends and it is little wonder that more investors are increasingly considering the predictable and consistent returns of unlisted infrastructure. All without the associated market volatility of listed investments. That is not to say that the asset class isn’t without risk.  For example the regulatory environment in the Australian energy sector has contributed to downward pressure on the valuations of some of the network distributors recently. The upside to this however, is that the regulated return for these assets for the next two regulatory periods has been largely determined which will provide a level of consistency for a period of time.”

“The key is to determine which assets and projects will provide the greatest, and most consistent, returns and to have a diversified portfolio of infrastructure assets across sectors and regions”.

Risk return profile of infrastructure

Source:  IPIF August 2019    

IPIF Core, its flagship fund, is designed for high-net-worth individuals, self-managed super funds (SMSFs) and smaller institutional investors.

IPIFM and its IPIF Core Fund were created in early 2015 in response to initial demand from smaller investors to benefit from the attractive mix of income, capital growth and stability that infrastructure assets can provide, in a low-cost structure.

IPIF Core’s investment strategy focuses on providing access to a diversified portfolio of mature, stable and cash-generating infrastructure assets.  This includes exposure to transport assets including Perth, Adelaide, Melbourne and Brisbane Airports and Interlink Roads, and a number of energy and utilities assets including TransGrid, the UK’s South East Water and PowerCo in New Zealand to name a few.

IPIF Core is open for investment and will be embarking on a $50m capital raise during March to fund continued investment with existing managers as well as potentially a new fund investment.

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Nicole Connolly

Despite a recent rise in the number of listed infrastructure fund offerings, smaller investors have largely been excluded from the increasingly popular unlisted infrastructure assets.

That is changing, according to independent funds management group Infrastructure Partners Investment Fund Management Pty Ltd (IPIFM).

Australia’s larger industry superannuation funds have invested in unlisted infrastructure since the mid-1990s, accessing the benefits and diversification provided by these real and reliable income generating assets, says Nicole Connolly, Executive Director of IPIFM.

In contrast, she says “the nation’s smaller institutional investors, high net worth individuals (HNWIs) and close to 600,000 SMSFs have traditionally been excluded from this market.

However, she notes that low interest rates and term deposits, coupled equity market volatility are prompting smaller investors to seek new ways to generate returns, beyond their traditional allocation concentration to Australian equities, cash and property. “And this is extending to unlisted infrastructure.

“Infrastructure, and particularly unlisted infrastructure is attractive due to its typically stable, reliable returns and low correlation to equities.

“Infrastructure in a portfolio sits between government bonds and equities in terms of risk return, making it an excellent portfolio diversifier,” she says (and as shown below).

“Infrastructure’s potential for stable, reliable income and capital growth is derived from long-term, stable and predictable cash flows, typically underpinned by long-term contracts or a regulated asset base; with high visibility of income and revenues often linked to inflation.”

This is one reason why unlisted infrastructure investments accounts for between 7- 12% of major institutional investor portfolios, with the Future Fund having some 7% allocated to infrastructure and Australian Super 12%, as at the end of 2017.

“We have recently witnessed an increase in the number of listed infrastructure funds on offer,” says Ms Connolly, “however no-one has been able to address the issue of access to unlisted infrastructure.

Why the increase in investor demand?

Ms Connolly notes unlisted infrastructure is renowned for its ability to provide consistent, reliable long-term income AND capital gains through the stable and predictable cash flows from diversified assets such as airports, seaports, power generation utilities and more.

“These returns have historically returned 9% p.a.-plus. This is more than the yields from Australia’s top dividend stocks of the big four banks and well above the rates of term deposits.

“Couple this with the recent uncertainty over the future of franking credits and dividends and it is little wonder that more investors are increasingly considering the predictable and consistent returns of unlisted infrastructure. All without the associated market volatility of listed investments.

“The key is to determine which assets and projects will provide the greatest, and most consistent, returns,” she says.

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