NOVEMBER 8, 2013

Institutional investors deploy globally

by Drew Campbell

Pension plan sponsors, sovereign wealth funds and other institutional investors have been active in global markets of late. London-based Universities Superannuation Scheme’s USS Investment Management Ltd. has acquired an 8.65 percent stake in Heathrow Airport Holdings, owners of Heathrow Airport in London as well as Glasgow and Aberdeen airports (in Scotland) and Southampton airport (in southern England). In the first six months of 2013, those airports handled 40.2 million passengers.

USS paid Madrid-based Ferrovial $634 million for its HAH interest, leaving Ferrovial with a remaining 25 percent stake. In June 2006, a consortium including Ferrovial acquired BAA Ltd., and later renamed it Heathrow Airport Holdings.

“We are pleased with the addition of a British pension fund to the group of international investors who are already part of Heathrow,” says Íñigo Meirás, CEO of Ferrovial. “Heathrow now has investors based in Europe, North America, the Middle East and Asia, including sovereign wealth funds from Qatar, China and Singapore.”

The $65 billion USS has a target allocation to infrastructure of 7 percent. The retirement system raised its target infrastructure allocation in March 2012, noting at the time it planned to invest about £2 billion ($3.1 billion) “in infrastructure over the next three years with a significant focus on U.K. infrastructure.”

In another U.K. airport deal, the Greater Manchester Pension Fund is part of a winning consortium that includes Beijing Construction Engineering Group and Carillion PLC. The consortium will invest $1.3 billion along with Manchester Airports Group to develop Airport City at Manchester Airport. The project is the focal point of the government-designated enterprise zone surrounding Manchester Airport, the United Kingdom’s third busiest airport.

More than 20 million passengers annually use Manchester Airport, and more than 6.5 million people (8 percent of the U.K. population) live in Manchester and the Northwest area, accounting for 11 percent of U.K. GDP.

On the continent, Danish pension fund IndustriensPension has agreed to invest in its first P3 to construct a new radiotherapy unit at the Næstved Hospital in the eastern part of the country. IndustriensPension will invest nearly €15 million ($21 million) of equity in the project. Construction is expected to both begin and end in 2015. Danish developer KPC is the project lead, and the firm won the contract to build and operate the new unit of the hospital for 10 years.

Further east, the Russian Direct Investment Fund and Deutsche Bank have made a joint investment in Russia’s largest telecommunications company, Rostelecom. The joint venture partners will invest a total of $237.1 million on a parity basis and purchase more than 72 million of Rostelecom ordinary shares from its subsidiary company MOBITEL.

Rostelecom provides services throughout Russia, and has more than 9.5 million broadband services subscribers and more than 6.8 million users of Rostelecom pay TV. Rostelecom is also one of Russia’s largest mobile operators with more than 13.6 million subscribers.

Meanwhile, Singapore’s sovereign wealth fund GIC has also made a significant capital allocation with a $135 million investment in Brazilian water and wastewater firm, Aegea Saneamento e Participacoes S.A., which is a division of Grupo Equipav.

In November, GIC invested $1.4 billion with Global Logistics Properties, Canada Pension Plan Investment Board and China Investment Corp. to acquire 40 properties in Brazil.

And, Down Under, Toronto-based OPSEU Pension Trust has opened an office in Sydney to focus on infrastructure and private equity investments in Asia Pacific. Managing director Stan Kolenc and portfolio manager Morgan McCormick will transfer from London to lead the Sydney office. The $13.3 billion pension plan sponsor has a 30 percent allocation to private equity and infrastructure

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