Global demand is growing for alternative places to park billions in American retiree savings.
AMERICAN pension funds are signing up in growing numbers with Australia's biggest infrastructure investor, as global demand grows for alternative places to park billions in retiree savings.
Over the past year, Industry Funds Management has seen a surge in investor commitments of up to $US850 million ($810 million) from US funds, which now make up more than a third of its overseas clients. With most of the US clients committing the funds in the past 18 months, IFM says the trend highlights growing overseas recognition of Australia's expertise in managing infrastructure assets globally.
The chair of IFM, Garry Weaven, said the ''spectacular'' growth in US investment showed asset management had the potential to become a bigger export industry for Australian firms.
IFM, which is owned by industry funds, was a pioneer in the development of investments in assets such as ports, freeways and power stations.
''By being a fairly early mover, it means we're an established player at the right time when a lot of the rest
of the world is starting to see this as a good, very stable alternative to simple sharemarket investing,'' Mr Weaven said. ''I think it indicates that Australian specialist fund managers that take this sort of path can become significant earners of income from offshore investors.''
While the so-called Macquarie model of externally managed infrastructure funds is on the nose with many investors, IFM's Australian infrastructure fund has averaged double-digit returns over 17 years.
The mandates from US investors have typically involved managing infrastructure assets in the US and Europe, but Mr Weaven said the trend could support Australian infrastructure projects over the longer term.
''Certainly in the long term, there's no doubt that this is opening up a much bigger pool of global funds to support Australian infrastructure development ? if we could ever get our act together as a nation to really get stuck into that.''
The trend follows growing interest in Australian infrastructure from Canadian pension funds, with the Canadian Pension Plan Investment Board this year teaming up with Lend Lease to develop the Barangaroo property project in Sydney.
Mr Weaven said North American clients now made up 32 of a total of about 80 clients in the world, and most of the new US business had signed up in the past 18 months.
US funds to have signed up with IFM include the $US155 billion California State Teachers' Retirement System, the pension fund for Northwest Airlines, and several funds are jointly managed by employers and staff.
Across its operations, IFM's funds under management have grown to $37 billion, an increase of more than three-fold from 2005-06.
Frequently Asked Questions about this Article…
Why are US pension funds investing in Australian infrastructure?
The article says global demand is growing for alternatives to traditional sharemarket investing, and US pension funds have been attracted to Australia’s track record in managing infrastructure like ports, freeways and power stations. Industry Funds Management (IFM) has seen rising commitments as investors look for stable, long‑term returns from infrastructure assets.
How much have US investors committed to IFM’s infrastructure funds?
According to the article, US investors have committed as much as US$850 million (about $810 million) over the past year, and most of those US clients signed up in the past 18 months.
What is Industry Funds Management (IFM) and how big is it?
IFM, owned by industry funds, is a major Australian infrastructure investor and was a pioneer in developing investments in assets such as ports, freeways and power stations. The article reports IFM’s funds under management have grown to $37 billion, more than three‑fold up from 2005–06.
Which US pension funds have signed up with IFM?
The article names several US signatories, including the US$155 billion California State Teachers’ Retirement System, the pension fund for Northwest Airlines, and a number of employer‑and‑staff jointly managed funds.
Has IFM’s infrastructure fund delivered strong returns?
Yes — the article states IFM’s Australian infrastructure fund has averaged double‑digit returns over 17 years, which IFM points to as evidence of its long‑term performance.
Could US investment into IFM help fund Australian infrastructure projects?
The article suggests it could. IFM’s chair, Garry Weaven, said the inflow from overseas funds opens up a much bigger pool of global capital that could support Australian infrastructure development over the longer term.
How important are North American clients to IFM’s overseas business?
North American clients are significant: the article notes they make up 32 of about 80 clients globally, and US investors now represent more than a third of IFM’s overseas client base.
What does the article say about the ‘Macquarie model’ compared with IFM’s approach?
The article says the so‑called Macquarie model of externally managed infrastructure funds is ‘on the nose’ with many investors, while IFM’s Australian infrastructure fund — managed differently — has delivered consistent, double‑digit returns and gained growing international recognition.
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