Former John Laing Infrastructure (JLIF) manager Andrew Charlesworth is looking to raise £200 million with the flotation of a new North America-facing infrastructure fund.
Tri-Pillar Infrastructure will be run by CAMG, of which Charlesworth is a partner and chief executive. Charlesworth, who left John Laing in May, is joined by Ian Ruddock, Vikki Everett and Norman Anderson, who previously worked with Charlesworth when JLIF floated in 2010 raising £270 million.
Tri-Pillar will aim to issue £200 million of shares and is targeting an annual dividend yield of 4.5% and a long-term internal rate of return of 8% to 10%.
The company will focus on infrastructure assets based in mainland Europe and North America and will target assets that ‘depend on revenues for usage and are subject to demand and not just availability’.
It said investments with ‘solely availability-based payments’ – such as hospitals and schools, which infrastructure funds have traditionally preferred because of their low-risk, government-backed revenues - had become expensive due to investor demand and it would look elsewhere for returns.
The fund will also look for assets that require investment or ‘value enhancement’ but said a more pro-active approach is needed to identify suitable investments.
As infrastructure funds report they are looking further afield as the UK market becomes too expensive, Charlesworth believes the US is the key to returns, particularly at a state level. He was involved in ‘Blueprint 2025’, a bi-partisan infrastructure plan set out before the US presidential election last year.
Tri-Pillar has identified a pipeline of assets worth £500 million, many of which are in the US and it is in ‘exclusive discussions’ with contractors on projects worth £190 million.
Charlesworth (pictured) said the fund would be ‘fundamentally different’ from traditional infrastructure offerings.
‘Firstly, we will have a wider geographic focus, capitalising on the significant and growing requirement for infrastructure in both continental Europe and North America,’ he said.
‘Secondly, we will target assets that offer greater scope for value enhancement, which includes assets the require refurbishment or construction. Thirdly, we will also focus increasingly on assets where revenues are based on the level of usage or third-party revenues, as opposed to the more traditional availability-based assets which are largely government-backed and where there is increasing competition in the investment market.’
By investing in projects that are operational as well as those that are in construction Charlesworth said the fund can provide ‘a blend of yielding and development investment’ with opportunity for capital growth.
Tri-Pillar is also considering launching a private fund in the US with a similar investment policy ‘in the near term’ to provide ‘co-investment’ opportunities.
‘The directors believe this co-investment opportunity will provide enhanced access to assets located in the United States, investing alongside local investors,’ he said.
It cited research by the World Economic Forum which has pointed to an annual, global funding shorfall of $2.7 trillion for infrastructure, due to a lack of investment by governments in the past.
The White House has also identified a $1 trillion need for infrastructure investment in the US and the American Society of Civil Engineers has estimated the need for $4.6 trillion of spending by 2025.
President Donald Trump promised a $1 trillion infrastructure plan when he came to power but despite the noise little has been achieved in his first year and with a lack of finances available, projects are likely to be turned over to the private sector.
‘While further progress on the development of the Trump administration’s infrastructure plan is awaited, the early indications are that there will be a significant increase in the opportunity for private-public partnerships and for what is termed ‘asset recycling’ (the transfer of state assets to the public sector), both of which provide addressable opportunities for the company,’ said Charlesworth.