For some asset owners, externally managed infrastructure funds clearly have their relative charms.
In recent months, Australia's A$52.1 billion ($40.2 billion) Victoria Fund Management Corp., which provides investment and fund management services for public bodies in Australia's state of Victoria, completed a two-year exit from direct investments in infrastructure assets, in favor of a model wholly focused on investing through external fund managers.
In an interview, Adrian Best, Melbourne-based VFMC's head of infrastructure investments, said the resource-intensive nature of direct investments — both in terms of specialization and personnel — drove that shift.
While the direct investments VFMC made beginning in 2007 performed as successfully as its external funds had, there was a recognition that its infrastructure team, which was approaching double figures, would “need to get larger to continue our direct program,” said Mr. Best.
With increasing competition for infrastructure assets leaving asset owners with less margin for error now, VFMC executives will look to benefit by relying on managers with far greater resources to identify value, he said.
The VFMC had roughly 4.4% of its portfolio allocated to infrastructure at the end of 2015.