The unique pension fund-owned structure of Industry Funds Management contributed to it winning a large infrastructure mandate from the $144.8 billion CalSTRS, whose risk-based view of the world has it looking for inflation-hedging diversification.
IFM, which is owned by 32 not-for-profit Australian pension funds, has been awarded a mandate of up to $500 million from the California fund to invest in a diversified portfolio of core infrastructure assets in North America and Europe.
IFM was a pioneer in infrastructure investing in Australia, investing since 1994. It has been investing globally since 2004 when it first bought a stake in Arqiva, the UK broadcasting towers.
Its portfolio now also includes the largest heating and distribution company in Poland, Dalkia, power utilities in the US and Germany and water and gas utilities in the UK.
For CalSTRS, which is relatively new to infrastructure investing, it addresses the goal for greater diversification in areas that would also serve as a hedge against inflation.
Inflation risk is one of six core factor risks for the fund, as part of its new approach to portfolio construction, which involves overlaying the risks across the portfolio.
The other risk factors are global economic growth, interest rate risk, liquidity, leverage and investment governance risk.
The fund’s target asset allocation at the end of December was a 2 per cent allocation to inflation-sensitive assets.
It also had a 1 per cent allocation to cash, 12 per cent allocation to private equity, 12 per cent allocation to real estate, 20 per cent to fixed income and 53 per cent to global equity.