Institutional investors have shown an appetite for Australian infrastructure investments in recent years and La Caisse de dépôt et placement du Québec's latest purchase shows the hunger hasn't yet abated.
The pension fund portfolio manager said Thursday that it would take on a 26.7-per-cent stake in the Port of Brisbane, the largest general cargo port in Australia's Queensland area, and the third-largest container port in the country. The investment is reportedly worth about $1-billion.
"We have an interest in increasing our investment in Australia," said Macky Tall, the manager's senior vice-president of infrastructure. He noted that the Caisse has also forged a relationship with a public-private partnership business called Plenary Group, which specializes in infrastructure. Together they have invested in seven diverse projects from hospitals to convention centres.
Ports in Australia have generated a lot of investment buzz in recent years. In 2012, the Caisse was rumoured to be among the bidders for two large ports, Port Botany and Port Kembla, in New South Wales state, along with other Canadian pension fund managers. The properties were ultimately acquired by another consortium of investors.
Alberta Investment Management Corp.'s chief executive Leo de Bever was part of that bidding process, but the return wasn't robust enough to take on the long-term investment, he said in a recent interview. "A lot of stuff is overvalued right now," he added.
Mr. Tall is unfazed by the prices he's seeing. "For quality assets, there's generally some competition and yes, it's challenging to make those investments, but... ultimately we make investments with a risk-return profile that we're comfortable with," he said.
The infrastructure portfolio at the Caisse was $6.5-billion, as of this past June
The Brisbane port diversifies the Caisse's infrastructure portfolio in several key ways, Mr. Tall said. First and foremost, this is the Caisse's first investment in a port. Each year, the Port of Brisbane manages more than 37 million tonnes of international cargo valued worth close to $50-billion.
It's also an investment in a region outside Europe and North America, which have been key markets for the Caisse's portfolio. Australia's relatively stable economy, compared to emerging markets, offers a solid foundation for longer-term infrastructure investments.
And the Brisbane port's growing exports to Asia also made this particular investment attractive. Geographically, it is the closest container port to the Asia-Pacific region.
"Indirectly, by building [our assets] in a country like Australia, we have exposure to those economies, which we think is attractive," Mr. Tall said.
This particular transaction is expected to close by Dec. 18, and Mr. Tall said he will continue to look for more infrastructure investments to add to the Caisse's portfolio.