31
may
2014
infrastructure
investor
KEYNOTE INTERVIEW
in the growth of the infrastructure debt
business came in 2012 when Tim Cable
was appointed to head up the European
business andNickCleary to overseeNorth
American activities from New York. This
was effectively Hastings’ response to the
market opportunity that opened up with
the departure of the banks fromlong-term
infrastructure lending.
Having mentioned these appoint-
ments, Day finds himself back on his
favourite topic of internationalisation
– and, this time, he’s reflecting on the
firm’s ambitions in North America. “We
see North America as a very significant
source of infrastructure capital andwe see
an increasing availability of infrastructure
opportunities,” says Day. “Investment in
infrastructure is not quite as developed
as in Europe but there’s a good near- to
medium-term opportunity.”
In February 2013, IreneMavroyannis
– the former KKR chief operating officer
and First Reserve managing director –
was hired as executive director and chief
executive officer of Hastings Funds Man-
agement (USA). Then, inDecember 2013,
Rob Collins, a former managing director
and head of infrastructure for the Ameri-
cas at investment bank Greenhill & Co,
was appointed Hastings’ head of global
investments for North America.
The hires, Day says, were designed to
“give us broader access and expertise. It
was a signal of our intentions”.
INNOVATIVE MODEL
As it seeks to grow its investor base across
Europe, North America and Asia, Hast-
ings believes its model is a differentiator.
It has investment teams operating across
geographies and sifting the best oppor-
tunities; once assets are bought, they are
run by a global asset management team
headed by former UTA chief executive
RichardHoskins “with very clear processes
and standardised approaches”; and then
there are portfolio managers “who look
after the capital pools and are responsible
for returns”.
How the portfoliomanagers go about
building their portfolios is an interesting
aspect of the Hastings approach. Day
describes it as a “risk-adjusted portfolio
model” and explains how it works as fol-
lows: “You build it by looking at a range of
criteria so that when you put together, say,
five or seven assets they work collectively to
reduce the risk.We introduced themodel
in 2003 to reduce the volatility of returns
so that inperiods ofmacroeconomic vola-
tility we would bemuchmore predictable
than most.”
In other words, Hastings will look for
the right blend of assets – for example by
sector, level ofmaturity and geography – in
order to provide investors with the level
of return they are expecting. This means
that the priority of the portfoliomanager
is selecting the asset (fromthe investment
team) that provides his portfolio with the
specific ingredients that it requires. “We
don’t just look at the asset and at the price
but at how it suits the portfolio,” says Day.
Asked about what happens when a
‘great’ asset comes along thatmight unbal-
ance a portfolio, Day replies that “we’re
unemotional. We’re not carried away
by the thought of an ‘outstanding asset’.
We put the asset through the model and
through our governance processes and
trust that that will give us the right result.
There are no deals we have to do.”
‘ABILITY TO NEGOTIATE’
So, given that there are no deals Hastings
has
todo, what are the kinds of deals it
likes
todo?Day reaches for a coupleof examples.
In May 2012, alongside Canada’s Ontario
Teachers’ PensionPlan,Hastings acquired
a 50-year lease of the Sydney Desalination
Plant in a transaction worth A$2.3 billion.
In Day’s view, the acquisition of the priva-
tised asset [Sydney Desalination] showed
Hastings’ “ability tonegotiatewithboth the
Australian state government and with an
external partner”.
The second is Phoenix Natural Gas,
the Northern Irish gas distributor ref-
erenced earlier. The deal was done by
UTA together with the RBS customised
account, with the asset to be managed by
UTA. “We had looked at it for two years
and were comfortable with the manage-
ment teamand the track record. Because
“We’re unemotional.
We’re not carried away
by the thought of an
‘outstanding asset’”
Melbourne Airport
: Hastings-owned asset
