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Private investors commit $41 million to social infrastructure fund

Tuesday 4th May 2010

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The New Zealand Social Infrastructure Fund’s initial public offer has raised $41 million of committed capital from approximately 750 investors.

NZSIF is an investment vehicle managed by Morrison & Co. PIP and Craigs Investment Partners, to in turn invest in the Public Infrastructure Partners Partnership (the PIP Fund). PIP is an institutional fund established to invest in public-private partnerships delivering assets such as schools and hospitals, which already has $100 million invested from the NZ Superannuation Fund.

NZSIF has another $100 million of committed funds from several large investors, and hopes to have a total of $200 million by October 2010 as a final amount to invest in PIP.PIP fund general manager Peter Coman said that given market conditions and the newness of this type of investment vehicle, “we’re very happy with where we’ve landed.”

“We’re very comfortable that the investors who have come in are quite sophisticated and understand this opportunity,” he said.

It is expected that NZSIF will pay out an estimated 11% internal rate of return over the 15-year life of the fund, rather than being an annual return.

Initially there will be calls on capital to construct assets, and as these are built and operated to a standard, the Government will pay a specified pre-agreed rate. For the early projects to be developed and delivered, there won’t be an income stream, but once the asset is operational there will be income and capital growth that can be distributed to investors.

“Over the life of the fund we expect an 11% return,” Coman said.

“We’ve spend a lot of time explaining that point, and its critical in our minds that people understand that. We’ve targeted the more sophisticated private investor, as this is not an off-the-shelf product.”At the end of the concession, the asset is transferred to Crown ownership at zero cost.

Initially NZSIF investors are being asked for 10% of their committed money as initial capital, with the other 90% being called in as more asset investments are made.

Coman said PIP is currently carrying out due diligence on two transactions, “and it’s nice to think that within the next six months we’ll have made our first investment and made a new call on investors’ money.”

The NZSIF shares will not be listed on the NZX, but Craigs will provide an order matching facility for potential buyers and sellers.

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