Institutional investors: Join the club

But they do exist. This November - a week or so after the AVCJ Forum in Hong Kong, as it happens - the institutional investors roundtable at the Quebec City Conference will convene for the sixth time. This invitation-only event is intended to facilitate discussion of these groups can leverage their long-term horizons, deep pockets, local knowledge and sector expertise to deliver optimal returns to their fiduciaries.

The website continues: "Institutional investors have been reviewing the balance of externally and internally managed assets, and assessing how to increase their exposure to real assets, in particular in private markets. As internal capacity and experience have been built among the leading funds, this has also led to a growing potential for ‘peer-to-peer' collaboration on strategy development, and ‘peer-with-peer' investment opportunities. Collaboration on co-investments has also stimulated innovative thinking on the structure of vehicles for long-term investment."

The identity of the participants is not disclosed; they are described as pension funds, sovereign wealth funds, government reserve funds and other long term investors. However, there are 13 founding members, among them Australia-headquartered QIC.

It is impossible to say whether the seeds of QIC's recently announced Asia-Pacific focused infrastructure partnership with California Public Employees' Retirement System (CalPERS) were sown in Quebec - the two parties said they had been working on it for several years - but it is clearly the sort of initiative that the event organizers had in mind. QIC will manage the A$1 billion ($764 million) venture, which will invest in high-quality infrastructure assets in sectors including water, power, transportation and energy.

This is likely CalPERS' first foray into Asian infrastructure. The pension system currently has $2.1 billion deployed in the asset class, which amounts to a somewhat paltry 0.7% of its $300.1 billion in investments. The allocation should increase over time.

CalPERS is on mission to reduce costs and investment risk. As a result, it has pulled out of hedge funds entirely, warned that it plans to reduce its number of GP relationships, and in the words of CIO Ted Eliopoulos "use every possible lever" to drive down costs. Last year the pension system said it would lower its private equity allocation from 14% to 12% over a two-year period, with an interim target of 10%. At the same time, the real estate share will jump from 9% to 11% while infrastructure and forestry go from 2% to 3%.

QIC is by comparison an infrastructure veteran. Of its $72.9 billion under management, A$5.8 billion is deployed across 10 direct infrastructure investments spanning transport, energy and utilities, and public-private partnership assets. Half of these assets are in Australia and New Zealand the other half are in Europe and North America.

Given QIC's appetite for projects in OECD countries with well-defined regulatory systems and predictable cash flows, it is likely that the Asia-Pacific venture with CalPERS will focus initially on Australia and New Zealand. There is likely to be no shortage of assets coming on to the market, with a raft of brownfield assets expected to be privatized, ranging from electricity distribution and transmission businesses in New South Wales to ports in Queensland.

Australian state governments are keen to use the proceeds of these privatizations to support the construction of greenfield developments and QIC has already participated in this process. In return for an extension of their concession for the M7 toll road in Sydney, QIC, Canada Pension Plan Investment Board (CPPIB) and Transurban Group agreed to back the city's A$2.9 billion NorthConnex tunnel project.

CPPIB is also a founding member of the institutional investors roundtable. CalPERS is not - and given its largely passive investment mandate this is not altogether surprising - but it may be about to make its mark on Asia's infrastructure landscape.

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• Topics
• Australasia
• Performance
• Infrastructure
• Infrastructure
• California Public Employees' Retirement System (CalPERS)
• Australia
• QIC
• Infrastructure
• Performance