IFM to push for more infrastructure deals in the US

The $150bn IFM Investors is stepping up contacts with the Biden administration.

IFM chief executive David Neal. Picture: Stuart McEvoy for The Australian.

The $150bn IFM Investors is stepping up contacts with the Biden administration in a bid to boost its $20bn infrastructure investment in the US.

In an interview with The Weekend Australian, IFM chief executive David Neal said the fund, which has some 90 staff in its office in New York, would be making contact with new administration to pitch its arguments for more private sector investment in infrastructure in the US.

IFM’s existing infrastructure portfolio in the US includes a 250 kilometre toll road in Indiana it bought for $US5.7bn in 2015, the Colonial pipeline from the Gulf Coast to the eastern seaboard, an LNG terminal in Freeport, Texas, and container terminals in Vancouver and the port of New York and New Jersey in the US it bought in 2018.

It stepped up its US investment in 2019 with the $US10bn ($12.9bn) purchase of publicly listed US energy company Buckeye Partners which manages some 9,000 kilometres of pipelines and 115 liquid petroleum terminals.

“The Biden administration has made a lot of comments about the need for more infrastructure investment,” Mr Neal said.

“The US clearly has an infrastructure deficit with a need to repair existing infrastructure and to build new projects.”

His comments come as Wall Street remains at record highs with investors expecting major fiscal stimulus from the incoming Biden administration and a continuation of easy monetary policy from the Fed. As well as infrastructure spending, renewables and technology are among areas expected to benefit under a Biden administration.

Mr Neal said he expected that new infrastructure investments would be part of the Biden stimulus package.

“Biden has not wasted any time in signing America back to the Paris climate change accord,” he said.

“It is clear from his statements that any infrastructure investments will have quite a lot of renewable energy components to it.”

“We do expect there to be a lot of activity in infrastructure in the US”.

“It does feel as though some of the stars are aligning in terms of America’s infrastructure deficit and the fiscal stimulus.”

Mr Neal said IFM was keen to invest more in infrastructure in the US provided it could find the right opportunities.

IFM, which acts as a fund manager for industry superfunds including Australian Super and Cbus, is closely watching the comments of Biden’s nominee for the Secretary of Transportation, Pete Buttigieg, who is a former mayor of South Bend, Indiana.

Sometimes dubbed the “main street of the mid-west” IFM’s toll road in Indiana runs through South Bend.

Mr Neal said Mr Buttigieg had already made comments about the need to improve surface transportation in the US.

While private sector investment in transport infrastructure is not common on the US, with some groups criticising private ownership, Mr Neal said Indiana’s experience highlights how the interests of long term investors such as IFM, which is owned by 27 Australian industry super funds, can align with the needs for public infrastructure.

Mr Neal said Biden had yet to outline the specific details of any new infrastructure projects he would back.

He said IFM would be watching closely to see how the Biden administration moved to encourage new investment in infrastructure in the US which was mainly done by the individual states and cities.

He said IFM had a long history of ties with the National Governors’ Association of the US, which represents the governors of US states, outlining its proposals for private sector financing of infrastructure.

“We will be active with this administration to bring forward our ideas from our experience in investing in infrastructure around the world,” Mr Neal said.

“We want to help them understand how best to handle the funding side of these projects.

“In the US infrastructure has typically been funded through municipal bonds which are free of federal income tax on their interest,” he said.

“This means they trade at a lower yield. It is very cheap funding for cities and states and makes it very hard for private capital to get involved in a lot of infrastructure investment.”

“Which is why private sector investment in infrastructure in the US is very low.”

But he said IFM was working with law makers in the US to explain to them the Australian experiences of infrastructure investment incentive grants.

“It has been used pretty successfully in Australia and we think it could be quite powerful in the US.”

Mr Neal said IFM has several hundred clients, mainly pension funds, in the US which have given it money to invest in infrastructure around the world.

He said it was keen to use some of that funding to expand its US infrastructure investments.

“We already have a substantial presence in the US,” he said.

“It is a big part of our business and it will be where a lot of the growth will be.”

“We will be engaging with the Biden administration helping them to understand how best to get funding from the private sector for infrastructure,” he said.

“We see an administration which is trying to hit the ground running and get things done.

“At the same time, we will continue engaging with cities and states around other pieces of infrastructure and what may be possible with them.”