Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
London Calling: Aware Super catches AI wave from UK digs
Aware Super has taken a minority stake in euNetworks, which builds and invests in city and long haul fibre networks to connect European data centres and hubs. The deal was part of a AU$3.4 billion equity recapitalisation led by Stonepeak and anchored by Mercer and Aware Super, with direct investments from IMCO and APG.
The euNetworks deal fits neatly into two of the fund’s focus areas – energy transition and digital infrastructure – and is a “great opportunity” for it to get more diversification in the digital space, according to Aware Super head of infrastructure Mark Hector.
“It’s one of the biggest fibre connectivity networks and specialises in connecting data centres across 17 countries, both within cities and in longer-haul fibre networks connecting data centres between cities; there’s about 50,000 kilometres worth of fibre,” Hector tells ISN. “It’s quite large and diversified and it’s been growing well over the last several years and has a good growth profile going forward, associated with increased digitisation and the AI revolution that we all read about in the papers.”
About 60 per cent of Aware’s infrastructure asset base is in Australia, with 20 per cent in the United States and – with the addition of euNetworks – about 15 per cent in Europe. And while Aware has shopped for infrastructure abroad before, this is the first direct infrastructure deal to come out of the London office it opened in 2023.
“There’s been a clear benefit in us having resources on the ground in the last year, hiring a local senior portfolio manager in Katya (Romashkan) that’s been immersed in that European for 20 years and who has established relationships and a better understanding of the opportunities.,” Hector said.
“Whilst in Australia we’re comfortable taking majority stakes or 100 per cent stakes in assets because we have a very, very good understanding of the local market. In Europe, the initial strategy is to partner more and take negative control stakes rather than taking a majority stake, and that’s what we’ve done here. We’ve got great confidence investing alongside the likes of Stonepeak and APG.”
While questions have lingered around how big super funds will maintain connectivity with offshore offices as they rapidly internationalise, Aware has gone to “great lengths” to make sure the London office – which is headed up by deputy chief investment officer Damian Webb – is very closely integrated with the “mothership back home”.
“We have very regular catchups between our infrastructure teams in London and Sydney to stay connected, regular team meetings and one-on-one catchups… and we also touch base and compare and contrast origination opportunities around the globe. We’ve got a singular portfolio – we don’t want to sit in silos.”
“We did intentionally send secondees over to London who had a very good understanding of our team and the operation in Sydney, and then complemented that by hiring European locals – particularly senior people that have a really good understanding of how the European market operates. There’s commonality in terms of asset classes, but Europe is comprised of a lot of different countries and a lot of different practices, different relationships.”
While digital infrastructure and energy transition are likely to comprise a larger chunk of its portfolio over the coming years, Aware is also keeping its eye on other subsectors of the infrastructure market for more opportunistic investments.
“We’re a direct investor; we aren’t just handing the keys to third-party fund managers with a pooled fund. We need to originate those opportunities ourselves, and that really comes from our own teams’ proactive research into sectors and subsectors and various relationships with GPs, advisers, industry specialists; you have conversations and those conversations take you in different directions.”
