Global pension funds are increasing their investment in India. Now, Dutch pension manager APG Asset Management, which recently inked a deal with Piramal to invest $1 billion, is sorting through a strong pipeline of potential deals across sectors, says Hans-Martin Aerts, Head of Infrastructure Asia, APG, during an interview to BusinessLine . Based in the Netherlands, APG manages pension assets totalling $382 billion. Edited excerpts:
APG has decided to invest $1 billion over a 3-year time frame in Indian infra, in a mezzanine investment deal with Piramal. Has the first tranche already been placed?
We are seeing a strong pipeline of potential deals across sectors. We will seek to invest in various infrastructure sub-sectors such as roads, ports, airports, power, telecom towers, hospitals and education. We expect to close one or two deals within the next few months, while simultaneously developing other pipeline opportunities.
APG believes in India’s long-term fundamental macro story. We expect the country to benefit from a demographic dividend from its young and rising population. India’s workforce is expected to increase significantly over the next two decades.
India is to spend $1 trillion on the development of infrastructure by 2017, half of which is to come from private sources. Are you talking to other companies...?
Of the $500 billion which is expected to come from the private sector, approximately $350 billion will be funded through debt and $150 billion by way of equity. Though our immediate focus is on deploying capital in attractive mezzanine investments through our alliance with Piramal, we are open to cooperate with other partners.
The Canada Pension Plan Investment Board (CPPIB) has also teamed up with the Piramals in India. Given the first movers advantage for CPPIB, is there any scope for APG to see better returns ?
The joint venture between Piramal and CPPIB seeks to offer debt financing to residential real estate projects in major urban centres. This is different from the investment strategy of our alliance with Piramal: we focus on mezzanine investments in infrastructure projects. The mismatch between demand and supply of capital is still there, and this provides a window of opportunities to make attractive mezzanine investments in infrastructure.
Which are the sectors outlined by APG that hold the most potential and where investments will flow?
The sectors that are expected to provide for most of the opportunities in Asia are the energy and transportation sectors.