Analysis ROUNDTABLE SPONSORS ANZ • PACIFIC EQUITY PARTNERS From crisis to growth With an economy that’s fast recovering, thanks to the government’s effective response to the pandemic, infrastructure investors are gearing for growth in Australia, with opportunities abounding in several sub-sectors, Daniel Kemp finds f all the countries have experienced terrible hardship. For affected by the investors it means the country’s econ- coronavirus pan- omy has already snapped back into demic, Australia’s something like normal – and the partic- experience has been ipants in our 2021 Australia roundtable relatively serene. are all eyeing growth again. OThere were the initial lockdowns across the country, which quickly lift- Speedy recovery ed. These were followed by sporad- “The pace of the reversion from that ic snap lockdowns in different state ‘triage’ stage in March and April 2020 capitals at different times, including to recovery, even to growth now, has for an extended period in Melbourne, been eye-catching,” says Robin Dutta, the capital of the south-eastern state head of infrastructure at ANZ. “The of Victoria. International borders re- consensus view is that the underlying main stubbornly closed to all but a A$3.5bn health practices here have been pret- small number of returning citizens and Value of Vocus take-private deal ty good compared with the rest of the wealthy international celebrities. world, and we shouldn’t overlook the However, at the time of writing sheer scale of the stimulus measures, the country has only suffered around which exceeds anything we saw in the 30,000 covid-19 cases and 900 deaths, global financial crisis. the vast majority of which have oc- “Both the public and financial sec- curred in Victoria. It has been a re- A$360m tors have learned a lot from past cri- markable public health achievement PEP’s final close on its Secure Assets ses in terms of managing the balance when so many other developed nations Fund in June 2020 of regulatory considerations with the 28 Infrastructure Investor • May 2021 Analysis Robin Dutta Head of infrastructure and PPP, corporate finance, ANZ Dutta runs the infrastructure and PPP team within ANZ’s corporate finance division. His role focuses on M&A/PPP financings across transport, social and digital infrastructure, with emphasis around the transition to a low-carbon economy. He was previously head of loan syndications for Australia at ANZ, which he joined in 2009. Prior to that, he spent 11 years at Citi with roles in Sydney and New York. Andrew Charlier Managing director, Pacific Equity Partners Charlier joined PEP in 2007, having previously been a consultant with Bain & Company in the UK, Australia and New Zealand, specialising in utilities. He received an MBA from INSEAD and has a bachelor of engineering degree from the University of New South Wales. Mark Hector Senior portfolio manager, infrastructure and real assets, Aware Super Hector is senior portfolio manager of infrastructure and real assets at Aware Super, the second largest superfund in Australia with A$140 billion of assets under management. Around A$9 billion of this is invested in infrastructure and real assets, which Hector has overseen since joining First State Super in May 2014. First State Super rebranded as Aware Super in mid-2020 following a series of mergers. Prior to this, Hector held project finance roles with Japanese bank MUFG, Leighton Contractors (now CIMIC), Babcock & Brown and ABN AMRO (now RBS). May 2021 • Infrastructure Investor 29 Analysis need to support borrowers and the “LPs, given that they thought they’d money into more pooled funds,” says broader economy. have a rush on withdrawals and that Hector. “Our mandate and overall fund “This has all played a part in posi- they might encounter the denomina- objectives have evolved over the last tioning the market for some exciting tor effect, stopped all new commit- year or so, to a point where almost all opportunities ahead. And infrastruc- ments. We just cut our fundraising at our incremental capital needs to be de- ture stands to benefit as much as other the amount committed and went with ployed on a pure direct basis or through areas of the economy, if not more.” that,” Charlier says. meaningful fee-free co-investments and Mark Hector, senior portfolio man- “For a good three to six months no partnerships where we can add value as ager, infrastructure and real assets at new funds were effectively raised. That a larger, trusted, reliable, sophisticated Aware Super, says infrastructure has is changing – we’re seeing fundraising investor.” proved to be “highly resilient”. come back and good money flow into This will not preclude the super- After swiftly writing down some as- funds, but almost all of it has flowed fund from working with external man- set values at the start of the pandem- to existing GPs. If you’re a new GP or agers forever, though this is not on the ic, the A$200 billion ($153 billion; have a new strategy, it’s a challenging agenda for now. €129 billion) superannuation fund market.” “We’ve done plenty of research talk- changed course mid-year. “At our Hector says Aware Super’s strategy ing to other global pension fund direct June 2020 end-of-year valuations we has evolved over the past 12 months, investors over the last several years, and were already writing back some of the partly as a function of the changed pan- every single major player still has mean- asset revaluations,” he says. “We real- demic world and partly because of the ingful external relationships, so that will ised that, certainly in Australia anyway, fund’s increased size. The Aware Su- be critical in our future deployment, things weren’t going to pan out nearly per brand was born last year from the too,” Hector says. “But we’re seeking as badly as we first thought.” merger of First State Super, VicSuper and WA Super to create Australia’s sec- Return to growth ond-largest superfund. The new normal has seen investors “We’re not really focused on sup- do things slightly differently. Andrew porting new managers or putting Charlier, a managing director at Pacific Equity Partners, explains that his firm is now having much more regular for- mal contact with the LPs in its funds. “We have a large series of superfund investors in our portfolio, who wanted “Take-private deals are week-by-week or monthly valuations, partly because of the pressures they had over early access to super,” he says, inherently uncertain referring to the federal government’s Covid-19 Superannuation Early Re- lease Scheme. “There was a big push and they have a lot to keep investors updated on where the portfolio might have impacts. “Those conversations gradually more complexity, so changed over the past year, to the point now where it’s about growth, including asking what deals are coming up and wanting to deploy more capital. But they’re not for the there’s still a lot more communication going on with our LPs than there was pre-pandemic.” faint-hearted” The health crisis also affected fund- raising. PEP held a final close on its ANDREW CHARLIER Pacific Equity Partners Secure Assets Fund in June 2020 on A$360 million, a change to initial plans to keep fundraising for a while longer. 30 Infrastructure Investor • May 2021 Analysis “The pace of the reversion from that ‘triage’ stage in March and April 2020 to recovery, even to growth now, has been eye-catching” ROBIN DUTTA ANZ scale benefits and value for money for “The amount of financing volume we says. “But what’s changed is that, as lit- our members. That means we need to transacted in that early period in 2020 tle as five years ago, there was still some reduce that fee load and naturally in- was equivalent to a normal year of busi- variability in views about digital and as crease the level of internalisation.” ness,” he says. “But by year-end, a lot to whether it was strictly within man- The fund naturally turned inwards of that activity had unwound. Facilities date for certain infrastructure funds. last year and focused on its Australian were repaid or cancelled as the broad- “Now, no infrastructure fund can portfolios. This was largely because of er market got a clearer outlook about ignore the space. The pandemic has the practicalities of doing due diligence what’s in front of it.” reinforced the wider investment the- on overseas investments when travel This, in turn, led to far fewer dis- sis, thanks to increased working from had been prohibited. tressed opportunities materialising home, e-commerce and even things “Our natural competitive advantage than expected, Charlier says. “We saw like e-health.” is here in Australia,” Hector says. “We so much liquidity come through, with Charlier says an “incredible wave” have people on the ground, we under- great support from both the govern- of demand for digital services is back- stand the market and the players, we ment and the banking sector, that busi- ing this up, but cautions that some in- are a trusted local owner of sensitive nesses you would expect to run into vestors might become exposed to high- assets, and we’ve got tax advantages. trouble, like airports, didn’t really. er levels of risk than they anticipate. “But as the superannuation sector “I still think that’s building, as there “We’re seeing the risk profile of continues to grow, we need to continue are distressed situations that we know of some of these deals increase, particu- investing offshore, and to do that cost that are coming, but we saw much fewer larly as people race to build capacity, effectively for unlisted investments in opportunistic deals than I expected.” as you have to take risk on offtake over particular in future, we are investigat- time,” he says.