This week's Australian spending spree in the United Kingdom has brought to light yet again the huge demand from Australian institutions for foreign infrastructure assets. In particular water.
Not only is it an ideal way to soak up the huge levels of uninvested pension money, but it's a good way to achieve stable cash flows and healthy growth opportunities.
Industry Funds Management (IFM) is one such home-grown investor that is looking to beef up its infrastructure assets overseas. It owns 19 per cent of Osprey Acquisitions, the special purpose vehicle that is attempting to buy UK water utility AWG Group for £2.2 billion.
IFM general manager Damian Moloney said AWG "fitted perfectly" with IFM's investment strategy.
In fact, it was only a matter of time before IFM attempted to scoop up some of the mother country's assets.
IFM opened an office in London in July this year and has been scoping out opportunities ever since.
"We opened the London office because of the increased number of investments IFM is making in Europe and in particular the UK. We needed a local presence and it's likely that will increase over time," Moloney told Investor Weekly.
He added that Osprey Acquisitions had now managed to purchase 12.5 per cent of AWG, 11.7 per cent of which came from AWG's biggest shareholder, Amvescap. "It's still a case of wait and see, 12.5 per cent is a reasonable position, but you never know what's going to happen in these kinds of situations," he said.
The offer for AWG came the same day Macquarie Bank sold the UK water business it bought in 2003 for £386 million.
Macquarie sold South East Water for £665m to Westpac-owned Hastings Funds Management in order to free itself to buy UK-based Thames Water.
Macquarie is one of three bidders in the running for Thames Water - the other two being European private equity firm Terra Firma and a partnership between UBS and the investment branch of the Qatar Government.
There is also speculation Macquarie might bid for AWG if it loses out in the auction for Thames. Alinta, the Australian infrastructure operator, has also been touted as a potential bidder for AWG.
English institutions haven't been this popular in Australia since, erm...
