Infrastructure investors and fund managers often profess to represent ‘long-term’ capital. This week, Dutch pension fund investor APG clearly demonstrated the length of its investment horizon, awarding a 22-year mandate to InfraRed Capital Partners to invest in social infrastructure.
The separately managed account has been set up to provide APG – which manages the investments of the Dutch pension funds, including the country’s largest, ABP – with diversified exposure to social infrastructure assets across Europe. And it is starting by purchasing £225m worth of hospitals and schools in the UK from HICL Infrastructure, a listed investment firm also managed by InfraRed.
Marjolaine Lopes, Europe social infrastructure lead at APG, described the investment as a “meaningful step in expanding our social infrastructure portfolio”, but no specific reason was given as to why the mandate has been set to last more than two decades.
It could have to do with the fact that individual social assets are often relatively small in value compared with some in other areas of infrastructure (for example, this week a consortium paid US$11bn to acquire gas processing facilities in Saudi Arabia). Building significant exposure – most likely through gradual aggregation of assets – can therefore take time.
Last year, Jan-Willem Ruisbroek, managing director of global infrastructure and private natural capital at APG, told IPE Real Assets that “there’s huge investments needed in social infrastructure, like schools, education and healthcare”. But he also said: “We’d like to be as active and influential and as large as possible in social infrastructure. However, for us, it will be particularly difficult to invest or overweight in social infrastructure, given that the single deals are so small.”
Also last year, we reported on how social infrastructure was a fast-growing sub-sector of the asset class – in spite of the challenge around achieving scale.
There have been other recent examples of pension funds moving more into social infrastructure. Earlier this month, Finnish mutual pension insurer Varma announced that it was investing through a fund managed by eQ Asset Management. Varma has committed capital to eQ Community Properties, the largest owner and developer of social infrastructure properties in Finland.
Meanwhile, Sacramento County Employees’ Retirement System in the US has committed US$50m to Aberdeen Global Sustainable Infrastructure Partners IV, a fund that will invest in social and economic infrastructure, including projects in health, education and social housing.
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