Pension discloses GIP, Macquarie performance figures

In a recent meeting, a San Diego pension offered a rare glimpse at internal rates of return and performances of two heavy-hitting infrastructure investors - Global Infrastructure Partners and Macquarie Infrastructure Partners.

Global Infrastructure Partners, the $5.64 billion infrastructure fund manager, has achieved an internal rate of return of about 17.4 percent on its debut fund, according to one of the firm’s limited partners.

The disclosure was one of two fund performance figures discussed at a 16 September meeting of the San Diego County Employees Retirement Association (SDCERA) board of retirement, according to a video of the proceedings.

The $7.2 billion California pension has a 3.2 percent exposure to infrastructure, which it achieved primarily via two investments: a $75 million commitment to Global Infrastructure Partners, made in October 2007, and a $75 million commitment to Macquarie Infrastructure Partners, made in February 2008, according to pension documents.

“And how are those investments doing?” board member Dan McAllister asked investment officer Loren de Mey at the 16 September meeting.

Turning first to Macquarie Infrastructure Partners, de Mey explained that the pension committed to the fund manager’s second fund. The fund, Macquarie Infrastructure Partners II, or MIP II, closed on about $1.6 billion in total commitments earlier this year.

“As of the most recent quarter, the IRR is about 2.4 percent on that fund,” de Mey said.

Johanna Shick, a spokesperson for SDCERA, said in an email that de Mey was referencing a net IRR figure reflecting MIP II’s performance through 30 June 2010.

A spokesperson for Macquarie declined comment.

De Mey went on to describe the performance of individual assets within MIP II’s portfolio.

“One of the investments is a cell phone tower company that’s been performing quite well. And then they have another utility based in Seattle, which was underperforming a bit,” she said.

The cell phone tower company de Mey was referring to is Global Tower Partners, a Florida-based owner and lessor of nearly 13,000 wireless communications tower sites. According to disclosures previously made by Macquarie, MIP II, bought a 28.7 percent stake in Global Tower Partners from another Macquarie-managed fund in September 2008 for $363 million.

The Seattle-based utility is Puget Energy, which MIP II acquired as part of a massive $7.4 billion take-private deal with other institutional investors in February 2009. In a recent investor presentation, senior executives of MIP II’s parent company, Macquarie Group, said Puget Energy had experienced a 3 percent decrease in its earnings before interest, tax, depreciation and amortisation in the 12 months ending 28 February 2010. They also said Macquarie Group has sold its equity stake in Puget Energy.

Turning next to Global Infrastructure Partners, de Mey said “their IRR is about just under 18 percent, I want to say about 17.4 percent.”

Shick, the SDCERA spokesperson, said in an email that Global Infrastructure Partners reported to SDCERA a gross IRR of 17 percent through 30 June, 2010.

A spokesperson for Global Infrastructure Partners declined comment.

A gross IRR does not take into account the impact of fees, whereas a net IRR does. SDCERA said in its annual financial report ending 30 June 2009 that it paid fees of $719,000 to Global Infrastructure Partners and $674,000 to MIP II in relation to its $75 million commitments to each of them.

De Mey added that Global Infrastructure Partners has “made a lot more investments” than MIP II. “They’ve made about 8 or 9 investments to date so that fund is performing quite well,” she said.

De Mey’s remarks were an aside in a larger discussion concerning a $75 million commitment to Brookfield Asset Management’s Americas Infrastructure Fund. SDCERA’s board of retirement eventually approved the investment, taking the Brookfield Americas Infrastructure Fund to a final close on $2.655 billion.

No fund performance figures were discussed for Brookfield at the SDCERA meeting.

However, Brookfield executives did disclose that they would seek to achieve for SCDERA gross investment returns of “15 percent plus, with a current income return of 4-6 percent”, according to a memo posted on the pension’s website.

Including the Brookfield investment, SDCERA will have a 4.2 percent of its pension assets invested in infrastructure, according to a pension document. That will leave it with a 1.05 percent “room for future additions” in its infrastructure portfolio, according to the same document.