Equitix seeks to invest into infrastructure projects with strong earning prospects whose impact on society and the environment aligns with its core ESG values. The assets that Equitix typically invests in exhibit the following characteristics:
The ability to deliver stable income over the long term
Benefiting from strong contractual agreements with robust counterparties
Providing essential or critical services to society
Fundamental to a country’s long-term economic growth
Benefiting from a monopolistic position due to a combination of the legal, regulatory or geographical environment in which they operate
Over the course of its 13-year track record, Equitix has found that the following sectors usually generate the most compelling investment opportunities in line with this philosophy:
Social Infrastructure – Education, healthcare, social housing, university accommodation and government accommodation
Transportation – Road and highways maintenance projects, rail projects and rolling stock
Utilities Infrastructure – Offshore transmission, onshore transmission, waste and water
Energy from Waste – Residential and commercial waste incineration, gasification, biomass
Renewable Energy generation – Solar, onshore wind, offshore wind, hydroelectric energy
Telecommunications – Telecommunication towers, broadband and fibre initiatives
Equitix’s traditional focus has been small and mid-cap assets – its average investment size is approximately £16m – and it therefore avoids the highly competitive ‘large or mega cap’ auction processes. This focus on smaller investments means it captures an inherent market inefficiency, these assets often being difficult to originate.
As an active asset manager, Equitix looks to improve returns from the base case returns at acquisition. Core infrastructure investment is traditionally more focused on yield rather than capital gain and the former will form an important part of the strategy. However Equitix has traditionally looked to lift returns where possible.
With over 125 employees working across a range of sectors, it has one of the largest teams of any UK-focused infrastructure fund manager. Sector specialists are employed who bring an in-depth understanding of each infrastructure sector to the investment process. Equitix also employs individuals with a range of skillsets to ensure all investment risks and opportunities are considered. For example, as well as the traditional legal and financial expertise required in investment management, it has professional engineers and infrastructure professionals within its team. Furthermore, the investments Equitix makes are often both technically or legally complex, and therefore difficult to source and manage. They may also have asset-specific risks (such as greenfield risk) that require more resource and time. This creates substantial barriers to entry and further market inefficiencies that Equitix looks to exploit to the benefit of its investors.