Igneo is targeting up to AUD 3bn (USD 1.95bn) in assets under management for its Australia and New Zealand-focused fund, ADIF, according to Head of Australia and NZ, Danny Latham (pictured).

“It is at about AUD 1bn in assets under management now and we would look to build that to AUD 2 to AUD 3bn over time,” he said in an interview.

The open-ended Wholesale Infrastructure Income Fund (WIIF), established in 2003, was officially renamed Australian Diversified Infrastructure Fund (ADIF) in May with a new board added in July, according to Australian Securities and Investments Commission filings.

It is one of Igneo’s four unlisted infra funds, alongside the open-ended Global Diversified Infrastructure Fund, the North American Diversified Infrastructure Fund and the European Diversified Infrastructure Fund – both of which are closed ended vehicles.

Latham said ADIF is raising money now but wouldn’t reveal the amount.

“That capital is expected to be rapidly deployed into bilateral deals or to support value accretive bolt-ons underpinned by the ‘buy to build’ platform strategy for its current assets,” he said.

One of those platforms is its Australian grid-scale renewables business, Atmos Renewables, which both acquires and develops projects.

The target sectors range from digital, to energy, waste and water and it will have a sustainable investment focus for 80% of its portfolio. The rebranded fund will also aim to take majority stakes, unlike WIIF, which typically bought minorities.

ADIF made its first bid under its new guise in NZX-listed telco Spark NZ’s sale of a majority stake in its data centre business.

Pacific Equity Partners’ second Secure Assets Fund won that auction last week.

“We did have a look at that deal with ADIF, but it was probably a little bit early for it to be bidding. But as of now, ADIF is in business,” he said.

As well as investing directly in existing energy and digital assets, Latham sees an opportunity to acquire and build greenfield power and recycled water assets that will be needed to support data centres.

Equity cheque sizes will ideally be around the AUD 200- AUD 300m, but it could range much lower, Latham said.

Igneo is also chasing a new field of investors, including self-managed super funds, family offices and rich individual investors, for the reformed ADIF as Aussie super funds get bigger and seek co-investments or look outside Australia.

But institutions will likely still make up about 80% of ADIF. “We expect the investor base will diversify as we assess expanding the offering to other investor types,” Latham adds.

“We are seeing active interest from institutional investors from Japan, Korea and the UK who view Australia and NZ as a ‘safe haven’ and portfolio diversifier compared to some other jurisdictions.”

Its risk/return characteristics have also shifted up to a more core-plus 10%-12%, from high single digits previously, and there is a new fee structure.

Latham won’t detail this, but says instead of just hitting a hurdle rate, the fees now incentivise ADIF to grow the assets and businesses they invest in, and they will seek controlling stakes.

“The fee structure has changed because it has moved away from being income focused more towards total return” he said. “It also incorporates sustainability objectives and, coupled with the performance element, we are much more aligned with our investors.”

At the moment, its investments remain what the wholesale fund held, but Latham said Igneo regularly reviews the portfolio to ensure that it is fit for the purpose to deliver its investment objectives.

To that end, it is making a second attempt to sell NZ gas, renewables and electricity distributor, Clarus (formerly First Gas NZ) advised by RBC, a separate source familiar said.

ADIF’s current investments are:

• 15% of grid scale renewables platform Atmos;
• 70% of the CleanPeak Energy Renewable Investment Trust – the holding company of Australian small-scale solar and C&I rooftop developer CleanPeak;
• 16% of New Zealand gas distribution, renewables developer and electricity network owner Clarus;
• 37% of Waste Management New Zealand, one of the country’s biggest waste managers;
• 49% of International Parking Group, which builds, owns and operates carparks under long term concessions in Australia.

Increasingly, Igneo is also accommodating more co-investments in its assets outside its pooled funds. Last week, super fund Cbus acquired 10% of Atmos.