- In 1998, Aberdeen Standard Investment began investing in social and economic infrastructure projects in Europe
- The Aberdeen Standard Investment Concession Infrastructure Investment Platform (“ASI Infrastructure Platform”) consists of 36 dedicated investment professionals across offices in the UK, France, Spain, Australia and Bogota
- Last year, they decided to tap into the Andean region and the Latin American market
- They launched a first fund targeting 250 million dollars of investment in Latin America, that they are hoping to invest over the next 3 to 4 years, in about 10 to 12 projects in Chile, Colombia, Mexico, Peru and Uruguay
Over the last two decades the ASI Infrastructure Platform has only ever invested in social and economic infrastructure projects. From their London and Edinburgh offices, in UK, they invested in government concessions, called Public Private Partnerships, which offer investors attractive risk-adjusted returns with a low correlation to economic cycles and other asset classes.
The Infrastructure Investment Team built a successful franchise that was then exported to Europe, opening offices in Paris and Madrid to cover all the Euro zone. Later, the team decided to expand to Asia, installing an office in Sydney, from where they invest in Australia, New Zealand and United States in funds that are targeted at US and Australian dollars. Last year, they decided to tap into the Andean region and the Latin American market, launching a fund targeting Social and Economic infrastructure projects in the Andean region.
According to Gershon Cohen, Global Head of Infrastructure Funds, his team tend to work closely with global contractors and operators in infrastructure, organizations that they consider their industrial partners, some of them are renown companies like the Spanish construction company Grupo Ferrovial or the French firm Bouygues, who specializes in developing, building and operating infrastructure projects around the world.
“We work with our industrial partners in bidding for concessions and the opportunity to invest in infrastructure through these concessions. We are backed by some of the worlds' leading investors in infrastructure. Investors that, for the last 20 years, have pioneered in infrastructure investments, like the large Dutch sovereign wealth fund, as well as the South Korean and some of the Chinese funds, and some of the very large private equity groups, like Partners Group. These groups have supported us on our journey”, said Mr. Cohen.
“When we invest in infrastructure and concessions, we are always looking for a degree of political, fiscal and economic stability, as well as legal certainty. All these characteristics are relative, because they have a different mix and degree depending on which part of the world you are investing. However, we try to marry the opportunity to invest with the needs of our investors and with a degree of stability. In that sense, UK and US are a very stable place, Europe is fairly stable and Australia a very good place to invest. But, we also look for governments that are wanting to bring forward a large pipeline of investment opportunities, and right now, one of the best places that has all these ingredients is the Andean region in Latin America. Argentina and Brazil also present many opportunities, but currently Chile, Colombia, Mexico, Peru and Uruguay offer more economic and political stability, in our view. Especially now that Colombia has just became a member of the OECD and Peru is on its journey to become a member of this organization”, he added.
The Latin American footprint
The Infrastructure Investment Team always thinks on a long term basis, elucidating which economies will look more stable from a political perspective and which ones will want to bring forward infrastructure projects to support their growth. In the specific case of Latin America, they invest in infrastructure projects that build roads, rails, schools, hospitals or water treatment plants. Even today, a high proportion of the population in Peru does not have access to clean drinking water, therefore, there is a big need to invest in projects that can treat water and convert it into potable water. Health, education and transportation are big issues as well.
“We are genuinely the only social infrastructure fund focused on the Andean region. There is no other competitor that are active and have offices on the ground or have capital dedicated to the region. Many of our peers are investing from their global vehicles, flying in and out, but giving the institutional way into our commitment to the region for a very long time, we have invested in developing a partnership with people on the ground, to gain a first movement advantage in the region, because we are honestly excited about building a team in Latin America”, said Ivan Wong, Deputy Head of Primary and Secondary Funds’ Investments and Asset Management at Aberdeen Standard Investments.
A couple of years ago, the ASI Infrastructure team team formed a strategic partnership with a Colombian based organization, a boutique advisory company – LQA Funds SAS that has a long track record in raising capital for infrastructure projects with both the government and the private sector; and was looking to become more of a fund manager. Last year, they launched a first fund of 250 million dollars that are hoping to invest over the next 3 to 4 years, in about 10 to 12 projects in Chile, Colombia, Mexico, Peru and Uruguay.
“We team up with our industrial partners to bid for contracts. Hopefully, if we are successful and the investors supporting us are pleased with the results, maybe in 2 or 3 year-time, we would do another fund, and maybe after that, another one. That is our strategy: to create a long-term presence in Latin America’s infrastructure environment. Later, on, we could bring up alternative or private equity strategies.
In mature economies, infrastructure has become so well understood that there is an oversupply of capital and less supply of projects, causing returns to decrease. However, the slightly more emerging economies -with relative political and economic stability- offer a similar risk profile and infrastructure projects yield mid-teens returns. If we stayed in Europe now, we will not be able to achieve that type of returns. That is why we are making a strong commitment to the region, we have an office in Colombia with seven people from the strategic partner, some more people will join our local partner from our teams in Madrid and Australia”, explained Mr. Cohen.
“As we become more familiar and successful within the region, and there is more economic stability in other parts of Latin America, we could look to broaden our scope to Argentina or Brazil, but we are very cautious. For 20 years, we have been gradually growing our platform and it makes sense to be cautious when you are entering in a new part of the world. We often say we are not very exciting, but in a world of volatility, long-term institutional investors are delighted to trust their pension funds money to us, because we have a very long term outlook and a track record that supports this”, added Mr. Wong.
The challenges of the region
Latin America’s economies are not simple, Colombia has just finished a long-term conflict and they still have some issues pending and Peru is going through a change of president, which is normally not easy. But, because ASI Infrastructure Team has presence on the ground, they can explain their investors in a transparent manner the complexities of the region. “Latin America’s investors are predominantly American leading investors that have already been invested in the region for many decades, so they actually appreciate the understanding that we have gained, and they recognize the challenges of the region. Nowadays, the US has more economic ties with Latin America than ever before, mainly due to political and macroeconomic issues. It is being an interest journey for us. We are delighted to be doing what we are doing and it is going very well”, concluded Mr. Cohen.