Sun Life Financial Inc. is expanding its global footprint as it buys a majority stake in Britain-based InfraRed Capital Partners, a global infrastructure and real estate investment manager.
The Toronto-based insurer announced on Wednesday it will purchase an 80-per-cent interest in InfraRed for £300-million ($515-million), adding infrastructure equity, real estate and renewables to Sun Life’s global alternative asset manager SLC Management.
InfraRed’s owners will have an option to sell their remaining interest to Sun Life approximately four years from the closing, and Sun Life will have the option to call any remaining interest approximately five years from the closing. In addition, Sun Life has committed to co-invest $530-million to support the launch of new InfraRed investment products.
Subject to regulatory approvals, the transaction is expected to close during the first half of 2020.
“We’re excited to acquire a majority position in InfraRed, which further broadens SLC Management’s alternative solutions to now include infrastructure equity,” Steve Peacher, president of SLC Management, said in a statement. “InfraRed is a leader in global infrastructure investing in both greenfield and brownfield projects, including renewable energy.”
The acquisition by Sun Life, which will expand its investment services for institutional investors such as pension plans, comes at a time when many of them are looking to reduce the number of relationships they hold with individual investment managers, preferring the convenience of dealing with one company.
With 175 employees and approximately $16-billion in assets under management, InfraRed advises institutional and pooled fund clients from offices in London, Hong Kong, New York, Sydney, Seoul and Mexico City.
The company’s assets are predominately invested in infrastructure, with less than a quarter sitting in real estate projects. Major infrastructure projects include construction of a Dutch high-speed rail link, production of 650,000 solar panels in Mexico, management of an off-shore wind farm in Germany and the expansion of a major highway in Southern France. In Canada, the asset manager helped finance and build the Royal Canadian Mounted Police headquarters in British Columbia.
Werner von Guionneau, CEO of InfraRed, said the acquisition will allow the asset manager to expand its growth in North and South America, in particular in the renewable energy market.
The transaction is consistent with Sun Life’s strategy to expand in alternative-asset management, a move that began in earnest with the formation of SLC Management in 2014. Last December, the insurer acquired a majority stake in real estate investment management firm Bentall GreenOak – by merging Bentall Kennedy, which Sun Life acquired in 2015, with GreenOak Real Estate – expanding its investment capabilities in commercial properties.
At the time, Mr. Peacher told The Globe and Mail the company was looking to broaden its exposure within the private fixed-income and private credit markets, as well as acquiring an infrastructure equity manager.
InfraRed will boost SLC Management’s third-party assets under management by 19 per cent, to $99-billion.
“The segment is well on track to easily exceed its $100-billion AUM target by the end of 2020,” said Scott Chan, research analyst with Canaccord Genuity Corp.
“Infrastructure equities provide diversification benefits, inflation-hedging, attractive yields and sticky income streams,” he said.
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