MANILA, PHILIPPINES - The Asian Development Bank (ADB) has approved an equity investment in a $625 million private equity fund focused exclusively on Philippine infrastructure projects - the largest and first of its kind in the country and well-timed to capitalize on various public-private partnership opportunities in the Philippines.
ADB's investment in the Philippine Investment Alliance for Infrastructure (PINAI) fund is alongside commitments from Philippines' state-owned pension fund Government Service Insurance System (GSIS), Dutch pension fund asset manager APG, and the Macquarie Group.
"Apart from our direct equity investment, ADB's participation can help mobilize additional investment in the Philippines from top tier international partners, foster competition in domestic infrastructure finance, and establish a secondary market for well-performing infrastructure assets," said Philip Erquiaga, Director General for ADB's Private Sector Operations Department.
"We are delighted to partner with GSIS, ADB and Macquarie and play a role in reducing the Philippine infrastructure funding gap. PINAI provides for an excellent investment opportunity and we expect it to enjoy an early mover advantage and to generate attractive risk-adjusted returns for our clients: pension funds in the Netherlands with combined assets of over EUR300 billion (around $367 billion)," said Hans-Martin Aerts, Head of Infrastructure Asia at APG Asset Management in Hong Kong.
ADB hopes the success of the PINAI fund will also spur more private equity funds that will catalyze additional foreign capital into the country, and further the development of domestic capital markets.
"Our participation in the fund will contribute to economic growth and investors' confidence. This will also mean enhanced returns on our investments which will redound to the greater benefit of our members and pensioners," GSIS President and General Manager Robert G. Vergara said.
The fund will invest in Philippine core infrastructure assets with an initial focus on existing projects that need expansion or rehabilitation, but will also be in a position to support the development of critical infrastructure projects from the ground up.
According to the Philippine Development Plan, around 12% of the country's $120 billion investment requirements need to come from the private sector. PINAI will target five to 10 investments of approximately $50 million to $125 million each to provide for portfolio diversification.
PINAI will be managed by Macquarie Infrastructure and Real Assets (MIRA), the largest infrastructure fund manager globally, with approximately $97 billion of assets under management across 24 countries. The value of the assets is based on proportionate enterprise value, calculated as proportionate net debt and equity value at 31 March 2012 for the majority of assets.
ADB, based in Manila, is dedicated to reducing poverty in Asia and the Pacific through inclusive economic growth, environmentally sustainable growth and regional integration. Established in 1966, it is owned by 67 members - 48 from the region. In 2011, ADB approvals including cofinancing totaled $21.7 billion.
APG, a financial services provider in the collective pensions market, provides pension fund administration, asset management, management support and communication services to pension funds. For these pension funds and their 4.5 million active and retired participants from the public and private sector, APG manages pension assets totaling about EUR302 billion (around $370 billion) (May 2012). APG administers over 30% of all collective pension schemes in the Netherlands.
Created in 1936 through Commonwealth Act 136, the Government Service Insurance System or the GSIS provides social security coverage to employees in the government sector under a defined benefit scheme. It provides protection to its 1.4 million members against the occurrence of certain contingencies such as death, disability, separation, unemployment or retirement on the basis of their monthly compensation. Funding comes from members and the national government and instrumentalities in the form of mandatory contributions. The GSIS also serves more than 300,000 old-age and survivorship pensioners.