Agenda item
Report from Alinda Capital Partners
Simon Rigall, a representative from Alinda Capital Partners, the infrastructure manager will attend the meeting for this item.
Minutes:
Alinda Capital Partners attended the meeting and provided the Sub-Committee with an update of the current investments performance. The fund comprised total investments of $4bn of which approximately $3bn had already been invested, with the intention to invest the remainder of the fund over the next 6 – 12 months. Alinda Capital Partners felt that they had invested conservatively in terms of leverage, adding incremental value each year. An overview of the investments was given and they highlighted their track record of adding value in North American investments despite the complex energy issues. Steady growth was anticipated given the position on the J-curve, and Alinda Capital Partners highlighted the merit of having chosen not to file in the USA and paying tax on Brent Pension Fund’s behalf.
Members queried the apparent anomaly of an improving yield net of fees yet given the downward trend in the gross cash yield. It was clarified that short term high yields were skewing the figures. It was explained that a 5-8% gross cash yield should be expected in 2013/14 but depended on the timescale for investing timing of the remaining capital. Due to the changing dynamics of pension funds as persons living longer, Alinda Capital partners felt that their infrastructure investments which would deliver a 5-7% yield would represent a good match for pensions. It was anticipated that as the gross and net figures would began to converge, with a typical spread of between 1.5% and 2.0%.
An overview of the investments within the USA was given particularly in view of hurricane Sandy which had not impacted the investments significantly. The 310-acre site of the HFOTCO investment was felt to have been bought at approximately half its true market value based on the long term contracts it holds. It was noted that the energy investment market had changed dramatically, particularly in light of the USA’s intention to become self-sufficient and that a proactive approach was required but the investments’ the fund has place had held it in a good position for the future.
Alinda Capital Partners are confident in the long-term prospects of their European investments, which are considered to be an important part of the overall asset portfolio. It was explained that the Agri.Capital investment had a value added strategy of substantial expansion through opportunities in Germany and the rest of Europe. Alinda Capital Partners informed the Sub-Committee that they intended to expand the Binnenlandse Container Terminals Nederland investment by expanding the existing terminal and the acquisition of new terminals. It was noted that although it was a small investment it was important and hoped to be doubled in size over the next five years.
The Deputy Director of Finance, Mick Bowden, queried whether the Government’s encouragement towards investing in UK infrastructure would be successful or have implications for the Fund. Alinda Capital Partners noted that the infrastructure was a complex investment and appeared to be the right asset for pension funds and Canadian pension funds frequently invested in this particular asset class. It was clarified that it would need to be the right asset for the Fund but felt to be an appropriate area to be looked at, particularly in line with the Government’s intention to encourage UK infrastructure growth and investment. It was highlighted that a third fund was hoped to be raised over the next 12 months with a similar yield but pre-established framework although this would mean less value to be added but a sustainable cash yield from day one. Alinda Capital Partners concluded that although their fees were high, these needed to be viewed within the context of having achieved a reasonable performance to date and would continue to invest in the right manner going forward.