30
infrastructure
investor
may
2014
KEYNOTE INTERVIEW
investments across Europe and
North America.
Hastings has several partner-
ships of this type with investors,
although the RBS mandate is com-
fortably the largest. Day says the key
to such arrangements is to “make
surewe have a close associationwith
the investor that’s very transparent.
We seek opinions as well as pro-
vide guidance”. He points out that
the partnerships are long term in
nature (“we keep our investments
for 20 or 30 years sowe buy to keep
not flip”). In this regard, Hastings
can point to a track record of a
12.2 percent return on equity since
inception. “Track record defines
everything in this space,” Day notes.
As well as these partnerships,
Hastings has two longstanding
equity funds: UTA, which was
founded at inception in 1994 and
has invested in the likes of Aus-
tralia Pacific Airports Corporation
(operator of Melbourne Airport),
Interlink Roads (operator of Syd-
ney’s M5), and the UK’s South
East Water; and 1998-vintage The
Infrastructure Fund (TIF), which
counts the likes of New Royal Ade-
laideHospital, SydneyDesalination
Plant andTexas’ StateHighway 130
(segments 5 and 6) among its port-
folio assets.
Until recently the firm had a
listed infrastructure strategy based
on three funds, which have all
now been fully or partially exited:
in November 2012, the Australian
Infrastructure Fund (AIX) was sold
to Future Fund for A$2 billion (€1.3
billion; $1.8 billion); the following
month, the Hastings Diversified
Utilities Fund (HDF) was takenover
by Australian natural gas infrastruc-
ture business APA Group; and the
firm is currently winding up the
HastingsHighYieldFund (HHY) in
a process expected to take approxi-
mately two years.
The listed infrastructuremodel
doesn’t always create the right align-
ment, Day believes. “Personally, I
think infrastructure is better held
in a longer-term, unlisted model
that’s suited to the needs of unlisted
institutional investors. We exited
our listed funds with a really good
return and it was the best thing both
for us and for our investors.”
AND THEN THERE WAS DEBT
Having invested solely in equity
for its first five years of existence,
Hastings began investing indebt in
1999 with the launch of the Hast-
ings Yield Fund. Since then, it has
completedmore than50 senior and
junior debt transactions in utilities,
social infrastructure, airports, toll
roads and seaports.
Helmed by global head Steve
Rankine in Sydney, a key landmark
One is a new “strategic alliance
agreement” with Indian conglom-
erate Aditya Birla Group through
which a joint platformwill be estab-
lished for investment initiatives and
opportunities in India. Hastings
says it plans to develop a perma-
nent presence in the country. The
second is a fund that will invest in
airports andwhichwill bemanaged
out of South Korea, where Hast-
ings has already had an office for
two years headed by Steve Song, a
former Macquarie Bank divisional
director.
Up until now, says Day, the
focus for Hastings has been on
“taking Asian capital and investing
it in OECD assets. But in time, we
expect a growing appetite to invest
in emergingmarkets and we watch
that with interest. Fromour Austral-
ianbase, we have a geographic prox-
imity to Asia and three of the four
largest countries in the world are
in the region with big populations
and fast growth. It’s the next fron-
tier andwe’re keen to formpartner-
ships based on trust and respect.”
CUSTOMISED SOLUTION
In Europe, such a partnership has
already been reachedwith the RBS
(Royal Bank of Scotland) Group
Pension Fund. The UK fund ini-
tially agreed to commit £750 mil-
lion (€898 million; $1.2 billion) 18
months ago to a customised solution
offered byHastings. InAugust 2013,
it invested alongsideHastings’ Utili-
ties Trust of Australia (UTA) fund
in the acquisition of Phoenix Natu-
ral Gas, the Northern Irish natural
gas distribution and energy services
firm, from Terra Firma. Around a
month prior to this interview, RBS
opted to increase the commitment
to £1.25 billion for debt and equity
››
“Basically I
was keen to
gain a broader
perspective.
When you look
on amap, you
realise that
Australia is a
longway from
anywhere”
