DC (Dialogue Capital):
Can you tell me briefly what areas/sectors in infrastructure are on top of your agenda right now?
Reynold Martin, Managing Principal, Allstate Investments:
We are open to most sectors in the infrastructure space. Our focus is on relative value. We do have some internal challenges related to lower returning strategies, but assuming we can find the right transactions that meet our needs, we remain open to the broader infrastructure space.
Additionally, we do consider our own portfolio construction when looking at deals. As an example, assuming we have a comfortable level of exposure to a sector, in addition to relative value, we would consider what is attractive about this transaction to add onto our portfolio exposure.
Finally, as an US$ investor, we think about net returns in US$. In many cases this can be done by evaluating the transaction return as well as any needed hedging activity to determine true relative value. This is easier with directs than with funds, but we regularly ask potential fund partners to analyse what their returns would have been to help with our analysis.
DC: How do you rate the investment climate in the regions you are active in?
Reynold Martin:
Our mandate focuses on OECD nations. Within the most active of these regions, healthy competition seems to be present. Where there is limited deal flow, there may be the ability to find one off transactions, however, we still need to consider things like currency impact and liquidity within the market.
There appears to be a significant amount of capital seeking to invest within the market. This can impact a few things, including our relative positioning within the market, competition for deal flow and/or strategy drift. These are all considerations that we take when analysing direct investments and fund investments.
DC: What’s your outlook for infrastructure for the next 3-6 months?
Reynold Martin:
3-6 months is an awfully short time to develop an outlook for infrastructure. If I had to give some synopsis, it would be that the appetite for investing in the sector continues to grow and there is concern that deal activity will keep pace. Additionally, regulatory risk seems to be increasing, which adds additional uncertainty to the market.