Australian asset manager AMP Capital has a long track record in real assets, especially infrastructure. Its first direct infrastructure investment dates back to 1988 when it supported the construction of the underwater Sydney Harbour Tunnel.
Since the firm has enlarged its range of investment opportunities including airports in the UK, telecommunications in Spain, transport assets in North America, hospitals in Australia and toll roads in India.
As of 31 December 2016, AMP Capital’s assets under management in infrastructure amounted to A$11.5bn (€7.66bn), almost 7% of the firm’s total AUM (A$165.4bn as at end-December 2016).
In Europe, where the firm has had presence in London since 2005, there is a growing wealth of capital being allocated to real assets, particularly infrastructure, says Kate Campbell, co-head European Distribution at AMP Capital, speaking to InvestmentEurope.
She argues that with such high demand finding value can be more challenging.
“Managers who can combine sector expertise in sourcing quality assets as well as strong operational capability will be best placed to deliver value. For us this means focusing on the mid-market, being disciplined in deal selection and avoiding the more competitive trophy assets where we think it’s harder to find relative value,” Campbell develops.
According to her, Europe is an appealing market for investing in infrastructure with its stable operating regime and access to quality assets.
“We think there are attractive opportunities to be found across the continent if you have deep sector and transactional expertise to buy at the right price, along with ongoing active asset management. We think there are value opportunities to be found in the Mediterranean markets and Nordic region.
“From an investor point of view, we’re seeing active interest from investors in countries such as Denmark, Finland, Germany and the UK looking to increase their investment in real assets, and growing interest from investors in France, Italy and southern Spain,” Campbell stresses.
Brexit could trigger “flight to quality”
AMP Capital’s co-head European Distribution assesses that the manager has been successful in exporting its infrastructure expertise across the world, including Europe.
She adds that last December the firm held final close on its global infrastructure platform having raised some US$2.4bn (€2.13bn).
“We saw a healthy appetite from European investors who were attracted to the unique structure of the fund, which included immediate access to seed assets across Europe, including Newcastle Airport, Thames Water, Angel Trains, Alpha Trains, Compania Logistica de Hidrocarburos (CLH).
“Our mid-market infrastructure equity strategy is achieved through an experienced global team with sector, management and investment expertise, that sees us able to identify infrastructure opportunities that bring to investors the characteristics they seek from infrastructure – regulation requiring the business to exist, high barriers to entry, monopolistic, and long term cash flows –to buy them at the right price, and to bring active asset management to ensure strong ongoing returns for investors in our fund,” Campbell explains.
A good example of this, she says, remains Esvagt, a provider of emergency response and rescue services in the offshore oil and gas industry in Denmark and Norway.
In addition to infrastructure equity, Campbell says another AMP Capital’s focus in Europe is on subordinated debt.
“Returns on subordinated debt are closer to infrastructure core equity than to senior infrastructure debt and through our origination skills and expertise, and rigorous structuring of transactions we are able to achieve consistently strong margins,” she highlights.
Does Brexit alter the Australian manager’s business plans in Europe? Campbell answers Brexit might cause uncertainty for some investors “but if anything we see there is likely to be a flight to quality in times of uncertainty and investors are more likely to be attracted to stable assets and the steady and reliable income streams they bring.”
The co-head European Distribution at AMP Capital adds: “Infrastructure is critical to a functioning economy and irrespective of geopolitical uncertainty we know there will be an ongoing need for investment in these asset classes.”