Fierce competition and scarcity of investment opportunities in alternative asset classes were among factors behind the creation of a new €1.5bn fund management company by Amundi and EDF.
Announced in October, the joint venture between French asset manager and energy group will finance ‘energy-transition’ projects.
Pedro Antonio Arias, global head of alternatives at French investment manager Amundi, told IP Real Estate that the new company will provide investors greater expertise than that on offer from a growing number of new entrants that have “pushed prices up” in infrastructure markets.
The as-yet-unnamed venture is aimed at both institutional and retail investors, with Amundi fundraising. An authorisation file for the new jointly-owned asset management company will be submitted ”very soon” to the regulator, Arias said.
Growing competition and keener pricing in infrastructure markets has prompted some investors to reassess the asset class. Earlier this year, a local authority pension fund in the UK deferred its allocation over pricing concerns.
Amundi has identified the energy-transition sector as one that remains attractive amid rising prices in other infrastructure markets and alternative asset classes.
“With prices having risen sharply, we asked ourselves if it was the right moment to step into the market,” Arias said. “The answer to that question for the past 18 months has been ‘no’.
“We have been cautious, but now is the right time to come back to the market.”
Several funds will be run under the new company, ranging from hydro power to renewables. ESCO and IPP funds will respectively specialise in energy-saving strategies for corporate customers and the provision of energy production assets.
At the same time, the joint venture will provide opportunities for real estate investments through EDF Invest, responsible for the unlisted investments of the group’s nuclear decommissioning fund. The real estate fund will be launched by Amundi and transferred to the new joint venture once up and running next year.
All funds share a long-term approach, EDF group head of finance and investments, Stéphane Tortajada said.
“We will target low-risk assets with low vacancy for the real estate fund,” he said, adding that with leverage, the fund would be able to deliver gross returns of around 8% to 9%. Arias added that the joint venture had a fund approach as opposed to a mandate, providing investors with access to deal flow, as well as combining EDF’s industrial knowledge with Amundi’s management ”expertise and track record”, aware that investors could achieve similar returns in other asset classes.
The venture will focus on assets with predictable cash flows while enabling EDF to source new development opportunities.