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CalSTRS partners with IFM on major infrastructure investment

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The California State Teachers’ Retirement System (CalSTRS) has awarded Industry Funds Management (IFM), a leading global investment manager, an infrastructure mandate up to USD500 million to invest in a diversified portfolio of core infrastructure assets in North America and Europe across a range of sectors.

The mandate represents one of the largest single U.S. fund management commitments made in infrastructure and will give CalSTRS global exposure to the world’s expanding infrastructure market. The mandate will be invested in two tranches, the first USD300 million will be invested immediately with the second tranche of USD200 million expected to be invested within the next 18 months. The CalSTRS mandate involves core infrastructure assets, such as regulated utilities, transport and other cash-yielding, inflation-hedged infrastructure investments.

The sector holds promise for CalSTRS, by helping it achieve several important goals, such as addressing some of its portfolio issues that emerged from the global economic crisis in 2008-09.

“What the recent economic crisis demonstrated was the need for greater diversification in our investment portfolio, in areas that would also serve as a hedge against inflation,” said Chairman of the CalSTRS Investment Committee, Harry Keiley. “This type of investment aligns our goals as patient long-term investors with both the jobs generation and infrastructure improvement our economy needs.”

CalSTRS Chief Investment Officer Chris Ailman cited IFM’s unique investor-owned structure and proven track record in acquiring and managing major infrastructure businesses through economic cycles as reasons for investing with the firm.

“We selected a well-established and well-respected partner precisely because CalSTRS is relatively new to the sector and we want to get to know it well before venturing beyond the fund structure,” Ailman said. “This decision is an opportunity for CalSTRS to partially hedge inflation risk by participating in the growing supply of high-quality infrastructure assets in developed economies, following the model of Australian pension funds, who have pioneered this sector and have leveraged the benefits of scale to deliver returns to their members.”
IFM Chief Executive Brett Himbury said that the appointment of IFM followed comprehensive and rigorous due diligence by CalSTRS.

“Given the depth of their review and the very professional way in which it was executed, this decision by CalSTRS is a real vote of confidence in IFM,” Himbury says. “CalSTRS is exactly the kind of investor we look to partner with. They are highly aligned with IFM being long-term institutional investors absolutely focused on optimizing the net returns for members. CalSTRS will sit well alongside other institutional investors, including some of Australia’s leading pension funds and other significant US and European pension plans.”

IFM’s head of infrastructure in North America Alec Montgomery, says: “CalSTRS’ commitment to IFM is encouraging confirmation of our collective approach to direct investing in infrastructure. Given the scale and complexity of potential investments in the US market, it will become increasingly important for investors to act cooperatively, both with each other and ideally with the public sector.”

 

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