Hastings Funds Management, the infrastructure boutique that Australian banking owner Westpac Group has struggled to find a buyer for over the past two years, is on a knife's edge following a vote of no confidence by a key client, market watchers say.
The Aug. 31 decision by unitholders of The Infrastructure Fund — an open-end fund with A$2.1 billion ($1.7 billion) of stakes in Australian airports, transmission grids, ports and roads — to replace Hastings as its manager over the coming year has boosted the potential costs of further delays in dispelling the cloud of organizational uncertainties that's hung over the firm in recent years, say sources familiar with the sales process, who declined to be named.
Concerns about Hastings' ownership and lack of strategic direction prompted TIF's trustee, Gardior Pty Ltd., to launch a review of The Infrastructure Fund's management structure late last year which concluded with the recent unitholder vote, said Jonathan van Rooyen, general manager-investments, with Gardior in an interview. Before joining Gardior in late 2016, Mr. van Rooyen served as an executive director with Hastings and the firm's portfolio manager for The Infrastructure Fund.
People familiar with the sales process said Westpac's inability to close a deal with potential buyers, such as TIAA-CREF and MassMutual Financial Group last year, and more recently Sydney-based real estate investment boutique Charter Hall Group, reflected disagreements — marked by "gamesmanship and brinksmanship," according to one — about the fundamental value of the Hastings franchise. The loss of key professionals along the way aggravated the process, they said.
Recent high profile departures included Peter Taylor, Hasting's global head of global investments and asset management, who left the firm in March 2016 to help lead The Carlyle Group LP's infrastructure efforts as co-head of the Carlyle Global Infrastructure Opportunity Fund, and Robert Collins, Hastings' head of global investments in North America and Europe, who left in March 2017 to lead 3i Group plc's efforts to launch a North American infrastructure business.
Meanwhile, people familiar with the infrastructure boutique say Andrew Day, Hastings' CEO for the past six years, is set to leave the firm over the coming month. Neither Mr. Day nor Hastings spokeswoman Lina Wynn responded to emails seeking comment.
In the wake of the TIF decision, observers predict either the Melbourne-based manager of A$14.3 billion in infrastructure assets — including TIF's A$2.1 billion — will succeed in securing a new owner capable of reassuring clients and inspiring its investment professionals or the firm will risk losing big chunks of its assets, as well as talent, to competitors.
Westpac bought a 51% stake in Hastings in 2002 and the remaining stake in 2005. The move to sell Hastings is in line with those of many Australian financial groups, which have looked to bolster capital by selling non-core businesses.
At a time when institutional investors around the globe are looking to raise allocations to infrastructure, settling the ownership question would remove one hurdle for asset owners considering Hastings, analysts say.
Something has to be done to resolve the uncertainty weighing on the Hastings organization now, said Ray King, investment consultant and founder of Melbourne-based Sovereign Investment Research.
"The right party is someone (with) the confidence of the clients" — perhaps another infrastructure player or a large private equity manager — who can "come in and settle it down," he added.
A Hastings news release Aug. 31 acknowledged the recent decision by the fund's unitholders to move on, but described the loss as a flesh wound rather than something crippling.