Summary
The purpose of the Pool is to provide access to exposure to global non-listed investments in infrastructure across the different asset styles (‘minimal’, ‘constrained’, ‘relatively high volatility’ contract styles), sectors and regions over the long-term (>10 years).
The Pool will, either directly or indirectly, only invest in and make commitments to investments that meet at least some of the following criteria: long-term duration, low volatility and low correlation to other asset classes, natural monopolies with high barriers to entry and limited alternatives, low sensitivity to technological obsolescence, predictable, stable and preferably inflation-linked cash flows, and a high sustainability value.
The Pool invests in equity and equity-related investments (e.g. preference shares, mezzanine, convertible debt) in primarily non-listed and listed infrastructure. Investments can be made through either Companies, Funds, Joint ventures or Co-investments. The Pool aims to invest in infrastructure projects that are expected to generate stable and predictable returns. There is a strong focus on the sustainability of investments.
The Pool targets the following asset styles:
- Group 1: Assets with ‘minimal’ volatility
- Group 2: Assets with ‘constrained’ volatility
- Group 3: Assets with ‘relatively high’ volatility
A robust framework is used to classify investments based on asset-specific risk factors. The key risk factors that are taken into account include revenue risk, operational risk, construction/capital expenditure risk, and leverage. Revenue risk is assessed based on price and volume volatility. Contracts, regulation and/or market volatility are all factors that influence price and volume risk.
Operational risk is evaluated by looking at the operational expenditure as part of the revenues (EBITDA margin) and how variable this expenditure is. Development capital expenditure is another factor that can have an impact on realized returns, and as such, it is considered when classifying investments.
Finally, the capital structure is taken into account. The greater the ability to service the debt, the lower the expected volatility. The assessment assigns a higher or lower score to each of these risk factors depending on the magnitude of uncertainty linked to it and the expected impact of the risk factor on returns. Specific guidelines have been developed for conducting the assessment, as well as a model for translating them into a group classification/asset style.
The Pool may invest in listed infrastructure investments where the Pool holds listed investments as (i) a result of investments being listed after the Pool’s initial investment in non-listed investments or (ii) investments made with the intention of facilitating a take-private initiative.