[INTERVIEW] ‘Integrating ESG’ ensures IFM’s success in investment.
IFM Investors focuses on infrastructure-focused strategy amid COVID-19
By Anna J. Park
Such clear founding vision makes the asset management company take a more public and long-term-based approach; that’s why IFM started as an infrastructure-focused investor, trailblazing success in the realm of global infrastructure investment in recent decades. According to the firm, the largest portion of its AUM is put under infrastructure investment ($47.9 billion), followed by $34.5 of debt investment, and $31.4 of listed equities.IFM Investors is one of the world’s top three infrastructure fund managers with $114.8 billion under management as of the end of last year. The firm was founded in 1994 by dozens of not-for-profit Australian retirement funds ― 27 employer-backed industry superannuation funds ― under the goal of protecting and growing the retirement savings of millions of working people.
Currently, the Australia-headquartered global asset management company invests on behalf of its founding investors and like-minded institutional investors from around the world, including in Europe, North America, Asia and Australia.
In an email interview with The Korea Times, IFM Investors Executive Director Zachary May said IFM’s special ownership structure and history help keep the firm true to its mission of securing retirement savings of people.
“IFM’s founding Chair Garry Weaven likes to say that IFM and the industry superannuation funds should help ordinary working people invest as if they were the wealthiest people on Earth: with access to the best capability and advice,” May said.
Pioneer in infrastructure investment
“IFM was established originally to invest in infrastructure, which, back then, was essentially a new asset class. IFM was a pioneer in infrastructure investing,” the executive director said.
“IFM’s founders believed that the savings of working people could not only achieve a good long term financial result by investing in infrastructure, but that investing in infrastructure also contributed to productivity growth, job creation and a better overall standard of living for beneficiaries.”
He explained infrastructure investment can deliver solid long-term net investment returns for institutional investors, as it has historically been less volatile than listed equities, and has historically not been correlated with most other asset classes, providing helpful diversification.
“There are a few important strategies for successful infrastructure investment. A long-term perspective is essential. Infrastructure is something that many people and businesses rely on directly or indirectly ― it is not an asset to cut corners or to try and make a quick buck,” May said.
“Relatedly, it is important to remember that infrastructure often provides an essential service, and that the investors are custodians of important economic linchpins. It also helps to have an open-ended approach, where there is an opportunity to make strong long-term risk adjusted returns by continually investing in the infrastructure operations, without having to worry about a forced exit.”
May said the firm’s strength as a long-term investor is also clearly reflected in “integrating” environmental, social and governance (ESG) analysis in its investment decisions.
“Being a long term-investor, consideration of environmental, social and governance factors is a necessary part of doing the job well. At IFM, ESG risks and opportunities are considered at the initial investment stage, and are taken into account in managing an asset,” he said.
Taking steps to reduce emissions within its infrastructure portfolio is one such case. IFM Investors has also reduced investments in companies after consideration of climate, labor rights and other ESG risks, including a coal mine, a payday lender, a privately owned prison, and a food and beverage franchise.
“The application of IFM’s ESG principles is also important to guide decisions when it comes to providing debt facilities. We believe well-governed, responsible companies are less likely to face unanticipated risks and, therefore, pose a lower risk of default,” May said.
|IFM Investors Executive Director Zachary May / Courtesy of IFM Investors|
The company’s Seoul office has been operated since November 2017, establishing partnerships with Korean asset managers, including KDB, KIAMCO, Samsung and Hanwha.
“IFM is committed to providing our unique aligned approach to long-term investors in Korea. Since 2017, local staffing has tripled in size. The way IFM approaches investing and its strength in infrastructure investment has been very well received, with 14 clients and investment of US$1.2 billion since the office was opened,” May explained.
May added that IFM is always ready to share information about its expertise in managing retirement pensions with policymakers in Korea.
“We understand Korean policymakers have been considering reform to the private corporate pension system to enable the creation of trustees that would operate on a not-for-profit basis, for the benefit of employees, and be governed jointly by representatives of workers and employers, with the ability to pool members from across regions and industries,” he said.
“This kind of pension fund means that all of the net profits of investing are delivered to the members, and is quite similar to the Australian industry superannuation funds that established IFM. These industry funds have performed very well in Australia, delivering significantly higher long term investment performance to their members compared to retirement funds offered by for-profit banks and insurance companies.”
Investment in times of COVID-19
Regarding a question on how IFM’s investment strategies has changed in the era of COVID-19, the executive director said the firm still maintains its long-term-based, public-interest-minded approach.
“Infrastructure investment is a long-term proposition and our COVID-19 response is focused on our assets and the protection of jobs and safety of workers, customers and the public, because we know they are vital to the long-term business success of infrastructure assets,” he stressed.
“In listed equities, we are actively monitoring global markets and communicating important information to investors as it comes to hand. Investment markets are obviously extremely volatile, however our operations are continuing as normal.”
Source: The Korea Times