Foresight is soon to open a debt fund targeting AUD$150-$200 million that will invest in smaller-scale renewables projects. The fund size is the perfect ticket size to sell as a bundle to a large institutional investor at the close of the fund’s life, in 5 years’ time.
So reports Infrastructure Investor in a recent article, explaining that the Fund will be Foresight’s first targeted at Australian investors, as the Group commits to the local market following the appointment of its new Australia head, Kim Nguyen.
Nguyen told the publication that “Superfunds are very fee-conscious and the large superfunds are moving away from fund managers. You see a very different relationship between LPs and GPs here, and in what LPs are looking for as they internalise more.
“Where the fund manager still plays a fairly important role is with the smaller institutions. They can’t afford to hire three people, say, to do infrastructure debt [in-house], but in theory they should still have an allocation to infra debt. We’ve been able to create a product that gives access to the asset class for those smaller institutional players who don’t have their own internal teams.”
She went on to note that all loans made by the fund will be certified via the Climate Bonds Initiative or the International Capital Markets Association’s Green Bond Principles – a first for Australia.
The article concludes with Kim Nguyen’s explanation on why the FREIF will target smaller projects, including why the fund’s debt investing strategy means lower inherent risk than equity funds: “The two key risks we’ve been experiencing and will continue to experience for a little while longer while the regulatory framework sorts itself out are [changes to] Marginal Loss Factors and contractor failures. Our view is that these smaller projects have a competitive advantage on those technical elements: they can be located closer to where the load is in the grid which allows them to be more MLF-resilient, and then they also have a faster connection process and lower cost, bringing down construction time and increasing the certainty of the delivery of the project.”