Developing a new private equity fund for infrastructure in the Philippines

Summary In 2012, the government of the Philippines identified insufficient infrastructure as a major impediment to economic growth. Attracting private investment for this agenda was a national priority given the government’s lack of fiscal resources and implementation capacity to meet demand. The Philippines government therefore approached the Asian Development Bank (ADB) to develop a platform to mobilise private capital for infrastructure. ADB worked with Macquarie, the Government Service Insurance System (GSIS, a local public sector pension fund) and APG (a leading pension fund manager in the Netherlands), to launch Philippine Investment Alliance for Infrastructure (PINAI), a private equity fund investing in core infrastructure assets including transport, energy and water. The fund raised $625 million from four institutional investors: (i) $400 million from GSIS; (ii) $150 million from APG; (iii) $50 million from Macquarie Group, the fund manager; and (iv) $25 million from ADB, which also provided support through knowledge sharing via the advisory committee and on corporate governance and safeguards. The first and final closing took place on 31 July 2012. The fund had a 10-year term with two one-year extensions. Of the $625 million raised, 87.5% was invested in six projects between 2013 and 2015. As fund manager, Macquarie sourced investment opportunities through its relationships with leading domestic developers and by bidding on greenfield public–private partnership (PPP) projects. PINAI effectively built proof points for other international investors looking at the Philippines, with interest rising following the country reaching investment grade status in 2013. It also catalysed Macquarie’s own follow-on efforts in the country, supporting further investments in geothermal and renewable energy assets through pan-regional infrastructure funds. GSIS became an investor into the Macquarie pan-regional funds, helping further mobilise local finance sources to support infrastructure build-out in the region.