Infrastructure’s wind of change

The fund is tipped to grow to be worth $500m over the next 2-3 years after raising an initial $200m over the next six months.

Mike Fitzpatrick. Picture: Aaron Francis/The Australian

One of the nation’s infrastructure investment pioneers, Mike Fitzpatrick, is launching a $200m infrastructure fund offering high net worth and self-managed super fund investors exposure to a high-quality asset portfolio previously only accessible to institutions.

The TRUE Infrastructure Fund will use a fund-of-fund structure, investing the proceeds of the raising with two of Australia’s leading infrastructure fund managers and their associated funds, Infrastructure Capital Group (ICG) and ATLAS Infrastructure.

ICG is one of Australia’s largest renewables investors and a leading manager of unlisted local infrastructure assets, while ATLAS Infrastructure is a specialist global listed infrastructure manager with exposure to high-quality listed infrastructure companies across developed markets.

Mr Fitzpatrick said while he was aware of the negative commentary around airport, toll road and city office investments that have been hit by the COVID pandemic, TRUE would have a focus on renewables, utilities and energy sectors.

This will primarily include businesses with revenue streams that are highly contracted or regulated, and/or which have monopolistic characteristics and strong market positions.

“Going forward from COVID, it is clear governments are going to emphasise infrastructure, just to keep the economy up and running. At the moment we are seeing an enormous amount of opportunities in renewables,’’ Mr Fitzpatrick said.

“Governments don’t have a choice, they are going to have to emphasise infrastructure over the next five years. But how many of these projects will be developed by private enterprise versus government remains to be seen.”

His comments come after one of the world’s top 10 asset managers, PGIM, revealed plans to step up its investments in Australian infrastructure as the nation’s biggest cities continue to grow in a post-COVID world.

PGIM, the $1.3bn global asset management business of Prudential Financial, has a private capital infrastructure team that manages a multibillion-dollar portfolio of private placement investments in non-energy infrastructure debt, with a focus on North America, Britain/Europe and Australia.

Its global chief executive David Hunt said recently: “If you have a two-year horizon you would not be investing in infrastructure right now but if you have a 25-year horizon, there are great opportunities.”

In 2009, Mr Fitzpatrick, the renowned founder of Hastings Funds Management and former chairman of the Australian Football League, joined ICG founder John Clarke – who started the company as a joint venture with ANZ in 2000 – to set up ICG as a new independent infrastructure business.

“I’ve been a major shareholder in ICG since 2009, so I haven’t really missed a beat in the space,” Mr Fitzpatrick said.

The TRUE Infrastructure Fund will be run by Peter McGregor, former CEO of the Australian Infrastructure Fund, and former head of Infrastructure & Utilities at Goldman Sachs JBWere.

He said the fund would grow to be worth $500m over the next 2-3 years after raising an initial $200m over the next six months.

“We are in discussions with the key independent financial advisory networks. Really we see the demand coming from the SMSF sector and the high net worth self funded retiree market where the real challenge has been finding low-risk income. The core constituency is around those,’’ he said.

“There is a solid pipeline of opportunities in the renewable space. There will be 11 assets in the portfolio on day one. While this isn’t a green fund or a renewable fund, it will have a high proportion of renewable exposure from day one.”

This will include allocations into Infrastructure Capital Group’s recently announced Australian Renewable Energy Trust (ARET), which is developing a pipeline of more than 1300MW of solar and wind development projects throughout Australia in partnership with ENGIE Australia & New Zealand and Mitsui.

ARET already includes Willogoleche Wind Farm, South Australia’s newest renewable energy resource, with the capability to power 80,000 homes.

Mr Fitzpatrick said while energy regulation had been “a very difficult space” in Australia, this was changing.

“The development in the grid and the efficiency coming into wind and solar to some extent are going to push regulation forward. They are ahead of regulation as it is,” he said. “You are seeing some very interesting proposals – for example, there is a big offshore wind proposal in the Bass Strait … government regulation needs to catch up in this space but I think it will.

“Against the backdrop of volatility in the global equity and credit markets and from my four decades of experience in infrastructure funds management, I believe this asset class is stronger now than it has been for a long time.”