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These vehicles look different and are chasing higher returns
Thursday 28 Oct 2021 Author: Tom Sieber

Infrastructure has been a popular area to invest in recent years but it is known for its reliable long-term income streams rather than being particularly dynamic or growth focused.

However, two new vehicles could shake up infrastructure’s rather staid reputation assuming they join the market as planned.

First up is Pantheon Infrastructure. People might be familiar with the Pantheon name. Pantheon Ventures is a large private equity firm which already runs the Pantheon International (PIN) trust.

What makes its new infrastructure proposition stand out from the crowd, according to the head of Europe in Pantheon’s global infrastructure and real assets investment team Richard Sem is it is truly diversified across different types of infrastructure asset and is targeting a higher level of return at 8% to 10%.

Sem observes that most infrastructure trusts listed in London either specialise in areas like renewables or government-backed projects.

Since 2015, the investment manager (Pantheon) has committed $2.7 billion to 34 co-investment transactions, delivering risk-adjusted returns of 16.7%.

The trust will co-invest alongside Pantheon’s unquoted funds and third parties which should help keep costs lower for investors – an immediate £1 billion pipeline is lined up, with hopes to invest in eight to 12 assets within nine to 12 months
of listing.

Sem tells Shares the trust will also have a shorter investment horizon than traditional infrastructure funds of around five to eight years. With a strategy of looking to improve the performance of assets through initiatives such as restructuring debt, achieving savings on operating expenditure and targeted investment and then potentially exiting.


He adds: ‘The valuation environment in infrastructure is certainly high at the moment but we have great ways to navigate that. We are highly selective in the deals we convert on and we benefit from not being tied to any particular sector.’

This means, as Sem explains, that if a lot of money is chasing digital infrastructure assets, for example, then it can look elsewhere.

The fund hopes to raise £300 million and the offer on the listing is open to 9 November with plans for shares to begin trading on 16 November.

The other new infrastructure play Alinda Capital Infrastructure is again taking a slightly different approach. It is investing in medium-sized infrastructure businesses (rather than underlying assets) with the aim, like the Pantheon trust, of earning returns in the order of 10%.

Like Pantheon, the investment manager, US private equity firm Alinda, also invests in infrastructure through the private markets.

The new trust will be a material investor in Alinda Infrastructure Parallel Fund IV as well as making direct investments itself and with partners.

Alinda is looking to raise £350 million and the offer is expected to close in mid-November. The Alinda fund is set to trade initially in the specialist fund segment of the London Stock Exchange which means it will only be available to sophisticated retail investors, though the plan is for it to opened up to a wider retail audience in time.

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