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…
Which US pension funds have recently committed capital to Industry Funds Management (IFM)?
The article says several US pension funds have signed up with IFM, 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.
How much money have US investors committed to IFM's infrastructure funds?
IFM has seen a surge in US investor commitments of up to US$850 million (reported as $810 million), with most of those US clients committing in the past 18 months.
Why are US pension funds interested in Australian infrastructure investments?
According to IFM's chair Garry Weaven, US pension funds are attracted by Australia's expertise in managing infrastructure assets globally and view infrastructure as a stable alternative to simple sharemarket investing.
What kinds of infrastructure assets does IFM invest in and manage?
IFM was an early mover in investing in assets such as ports, freeways and power stations, and mandates from US investors have typically involved managing infrastructure assets in the US and Europe as well.
What track record does IFM's Australian infrastructure fund have for returns?
The article reports that IFM's Australian infrastructure fund has averaged double‑digit returns over a 17‑year period.
Could US and other overseas pension funds help fund Australian infrastructure projects?
IFM's chair suggests the trend of US and other overseas investor commitments is opening up a much bigger pool of global funds that could support Australian infrastructure development over the longer term.
How large is IFM in terms of funds under management and client base?
IFM's funds under management have grown to US$37 billion, more than three‑fold since 2005–06. The article also notes that North American clients now make up 32 of about 80 clients worldwide, and US funds comprise more than a third of its overseas clients.
Is the externally managed 'Macquarie model' still favoured by infrastructure investors?
The article says the so‑called Macquarie model of externally managed infrastructure funds is 'on the nose' with many investors, while IFM — positioned as an established specialist manager — has delivered long‑standing double‑digit returns.
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