This page has been archived and commenting is disabled.
Calpers Buys Stake in Gatwick Airport
Michael
Marois reports in Bloomberg Businessweek, Calpers
Buys Equity Stake in London’s Gatwick Airport:
The
California Public Employees Retirement System, the largest U.S. public
pension fund, is buying a 12.7 percent equity stake in London’s Gatwick
airport, according to two people with direct knowledge of the sale.
Global Infrastructure Partners, a buyout firm that
purchased Gatwick in 2009 from BAA Airports Ltd., will sell a
106-million-pound ($157 million) stake to the pension fund, according to
the people, who spoke on condition of anonymity because they weren’t
authorized to release the details. Gatwick is the U.K.’s second-largest
airport and the busiest single- runway airport in the world.
New York-based GIP, which is backed by Credit
Suisse Group AG and General Electric Co., said in December it intended
to sell stakes in the airport this year after purchasing Gatwick for
1.51 billion pounds. Calpers, as the $203.6 billion fund is known, has
been adding to a new asset class intended to hedge against inflation by
investing in commodities, timberland, inflation-linked bonds and
infrastructure such as power plants, airports and toll roads.
In March, the pension fund said it intended to
allocate as much as $1.3 billion this year to its infrastructure
financing program, including as much as $900 million in funds that
invest in infrastructure assets and another $400 million directly into
such projects. The inflation-linked asset class will eventually
encompass as much as 5 percent of assets.Airport Sale
The airport
was offered for sale last year as Britain’s Competition Commission
pondered a breakup of BAA to reduce the company’s dominance of the U.K.
market. In February, GIP said it was selling stakes of Gatwick to the
Abu Dhabi Investment Authority and to Korea’s National Pension Service.
Andrew McCallum, head of communications for
Gatwick, referred questions about the sale to GIP. Jack Cowell, a
spokesman for GIP in New York, didn’t immediately respond to a call
seeking comment. Brad Pacheco, a spokesman for Calpers, declined to
comment.
This might turn out to be a good deal for Calpers.
Ontario Teachers', who is a lot more experienced in infrastructure
investments, recently
increased its stake in Bristol International Airport, a sign of
confidence in British airports.
Infrastructure is indeed a burgeoning asset class and
more pension funds are looking to
aggressively allocate to these investments. Unfortunately, few have
the investment staff to fully understand the risks of infrastructure
investments and how to properly structure these deals.
***Different take on this
deal****
Nice to have some divergent feedback:
This a sell down of a risky Why would you say this might be a good deal? Is Just thought you enjoy a So what should be invested in?
investment by an investment bank led group, who essentially underwrote
the equity to get the fees and senior loans, and then sells on with a
promoted arrangement to the funds that believe infrastructure is low
risk. Not much different than packaging CDOs and selling into "asset
class" oriented investors who once a mandate is invented simply fill up
the bucket.
anything with infrastructure in the name a good deal? What is the
success at OTPP which suggests they have unique expertise? The Calpers
fellow executing this has more experience than anyone at OTPP (and who
over there is actually the infrastructure expert?) The only
infrastructure investor success in Canada was some older deals done by
OMERS, and even they have not closed anything of note in this area in
some time. Infrastructure was and remains an academically appealing
asset class, with horrible execution and frothy market outcomes, which
will cost institutions dearly over time. Ask the Caisse how its airport
investment in the UK turned out...
different take on things.
Greenfield projects, development and venture capital, some forms of
mezzanine debt in established business, and very select large scale
buyout driving industry consolidation and capacity reductions. Throw in
some automotive turnaround investment, hold lots of bonds and stay away
from emerging markets, and there is lots of useful things to do.
Infrastructure trading of built assets at low underwriting rates of
return is not on the list...
Some more feedback on this infrastructure deal:
All very
good points. I think that your comment regarding infrastructure deals
is more than fair.My experience is that there is value in these
deals but that the deals themselves are very poorly structured.The
underlying question is if the deals are structured poorly by choice to
generate volume or is the poor success rate in this asset class a
consequence of inexperience.
My view is that incompetence is high
in this industry if you compare to other sectors like power. This
incompetence is due to the growth of the sector over the last 10 years
and younger inexperienced recruits are leading larger deals.Also,
Infrastructure has its fair share of snake-oil salesmen as well.When
you combine all of the above elements, you have the ideal recipe for
some major-league train wrecks. I happen to be living in one today.My
advice to Canadian pension funds is to pick partners carefully. Also,
avoid making the fatal mistake of staffing deal teams with ex-bankers
only. I find it amazing that institutions making long tenor
investments hire staff whose experience ends at financial close when
the investment has another 30 plus years to go before it matures.What
is even worse is when they convince themselves to put the same people
on the Board of the operating company.Anyway, a few thoughts
from the trenches ...
»
- advertisements -
Some more feedback on this infrastructure deal:
Calpers is crazy. How on earth do they think that they can get around 8%/year on this stupid investment?
Does Calpers have some crazy idea that air travel will be picking up? Perhaps the price of jet fuel will drop 50%.
Nuts.
Another FOB to bomb targets to the East?
With $600b under management, they have absolutely no business in anything but the S&P and treasuries.
With a 53% stock allocation and all these bullshit "alternative investments" (like the $600m they just lost on Stuy Town) they've averaged 2% returns over the last 10 years.
They would've done just as well, if not better, going 50/50 stock/treasury, letting the computers run it for 5 basis points a year, and firing every useless financial parasite in their hire.
pension funds buying assets. Proof we are just about at a market peak. I always try to look for when sovreign wealth funds buy some big thing, or pension funds. the pro's always unlaod them at the right time to the dumb money.
I'd imagine gatwick looks great considering the rosy economic future projections of the UK.
http://www.calpers.ca.gov/index.jsp?bc=/about/organization/board/members...
"Ad Hoc Risk Management Committee"
So, this is the guy they bring in when the regular risk management committee doesn't have a fucking clue how to assess the risk of an investment?
It's almost like Calpers is intentionally trying to fuck up in order to get nationalized, and all the while the State department gets the bonus of having a US fund invest in a major piece of UK infrastructure in order to help appease the pissy whiners upset that their BP sugar daddy may be a little light on cash for a bit.
But that would be a conspiracy, and we can't have any accusations to that effect.
Shit,
<Rob Feckner
President
CalPERS Board of Administration
Rob Feckner, who has been on the CalPERS Board since 1999 representing school members, is serving his fifth annual term as President of the CalPERS Board.
Mr. Feckner is also the Chair of the Ad Hoc Board Governance Committee and Vice Chair of the Benefits & Program Administration Committee. He also serves as a member of the Health Benefits, Investment and Ad Hoc Risk Management Committees.
Mr. Feckner is in his 33rd year with the Napa Valley Unified School District, where he is currently employed as a glazing specialist. He has also worked as a school bus driver and instructional assistant for special needs students.>
They are really fucked up!
President of CalPERS Board of Administration is glazing specialist and a former bus driver.
Well, the president of the USA is a fraud and "Chicago" style politician. He is also a man of very questionable nationality.
They have delicious crumpets at Gatwick?
LOL! I hate crumpets or fish & chips!
Calpers Board Pres:
I am not showing this pic for any other reason than to put a face to a title. This man is a "glazing specialist" - and there you have it. It is all fun until you run out of other people's money. Putting folks in charge who are not capable of understanding money at all is a sure way to lose all money.
You scream I'm lazy, you must be crazy, thought I was a doghnut ~ you tried to glaze me.
-Rakim
There are few old adages from the market that still work, but try this one.
"Foreigners always buy in at the top."
Leo.. A question
If the Ontario Teachers Plan tanks in their investments it's my understanding that the Government of Ontario (already in a gigantic structural deficit) is on the hook for any resulting shortfall in this very generous plan. Is that correct?
A lot of U.S. state linked government pensions are secured in similar ways. They are "guaranteed" by state constitutions. Because of stakeholders pushing the issue, many constitutions were amended to create these guarantees during the last 30 years.
Yes, some pension systems can raise contribution rates on employees, but the other half of the equation is usually employer contribution rates (vis., the government). And if the sponsoring governement does not pay a contribution rate, or there are not enough funds to pay pensions, some states have laws where the pension system can and must access funds from the state treasury after tax revenues are collected but before any other disbursements are made.
Not a bad game for these pensions. Heads (great returns = > lower contribution rates and higher pensions) the pensioners' win! Tails (poor returns = > higher taxpayer funded contribution rates and guaranteed pension payments by taxpayers) the taxpayers' lose.
There is already a huge deficit. Teachers' is upfront about that and they know it won't be covered by investments. So yes, the Ontario gvt is on the hook, but they have many options, including raising contribution rate.
GE played Calpers for the suckers they are - this is an old airport in decline.. Well, I hope at least they took out a CDS on an Iceland volcano not creating a problem. Why do all these pension crazies go play in currencies other than the one their liabilities are in? I should apologise because GE's been sold a lot of crap so it's only fitting they pull one off on Calpers.
Yes but you can count on the GE cod/mouth pieces at CNBC to assure the union chumps that they scored, big time...
Hey, they got the real estate biz dicked.
Pardon my dyslexia.
This is a terrible investment. Gatwick is an awful airport in decline, that has made its money by sending Brits on charter flights and short haul weekend trips. Trouble is, the future for this is awful once the credit cards are maxed out. You are equity holder, so unless this is a growing business, you will suffer. The revenue streams are from sales in the airport and inflation linked fees per passenger. Well, watch how this gets messed up as the UK govt fiddles with official RPI data to reduce costs of entitlements. The other thing is there are no flagship airlines to speak of. The Ryanairs and Easyjets will press for the best deals and will upsticks. You also have London City airport as a serious London challenge (Gatwick is an hour out of London, so about the same as Luton.)
Calpers once again lives up to its reputation as the dumbest investor out there.
There's really a "Luton"? I always thought the Monty Python guys had made it up, like their fake venereal disease, "semprini".
It's a good thing to diversify, even better to do it while existing investments still have some value.
Oops--Calpers fucked up again. Have you ever used Gatwick? The word torture comes to mind...
It can't be any worse than Heathrow.
Never been through there, but always thought of it as a semi-major to back up Heathrow.
Had no idea it had just a single-runway for gosh sake. In the vernacular: extr'ord'n'ry!
There is still beaucoup gold in the Sierra, crying for timely investment that would put locals to work. They must have gotten advice from Goldman.
It's too bad Calpers doesn't want to invest in their own backyard.
CA could really use a few bucks these days....
Agreed. Why couldn't Calpers pump some capital into the Clippers, contingent, of course, on the team signing LeBron?
Since CA is broke, the parasite needs a new host. So they will leech off other taxpayers. I am of course assuming UK/EU air travel is as least as subsidized as it is here.
What could go wrong?
Katla and a global recession/depression
Ding ding ding - if they decided on this *after* (Alphabet) blew, then they deserve to face their vengeful, starving members. Katla is an odds on favorite to blow. Idiots...
***Different take on this deal****
Nice to have some divergent feedback:
This a sell down of a risky investment by an investment bank led group, who essentially underwrote the equity to get the fees and senior loans, and then sells on with a promoted arrangement to the funds that believe infrstructure is low risk. Not much different than packaging cdo's and selling into "asset class" oriented investors who once a mandate is invented simply fill up the bucket.
Why would you say this might be a good deal? Is anything with infrastructure in the name a good deal? What is the success at OTPP which suggests they have unique expertise? The Calpers fellow executing this has more experience than anyone at OTPP (and who over there is actually the infrastructure expert?) The only infrastructure investor success in Canada was some older deals done by OMers, and even they have not closed anything of note in this area in some time. Infrastructure was and remains an academically appealing asset class, with horrible execution and frothy market outcomes, which will cost institutions dearly over time. Ask the Caisse how its airport investment in the UK turned out...
Just thought you enjoy a different take on things.
Forgot to add:
So what should be invested in? Greenfield projects, development and venture capital, some forms of mezzanine debt in established business, and very select large scale buyout driving industry consolidation and capacity reductions. Throw in some automotive turnaround investment, hold lots of bonds and stay away from emerging markets, and there is lots of useful things to do. Infrastructure trading of built assets at low underwriting rates of return is not on the list...
Please excuse my ignorance, but I don't get it. Is there a fixed interest rate on this deal, or how does that go??? How are the returns gauged??? Most of the profits come from Airlines paying for terminals??? My main question though is, is it a fixed rate on the deal???
Might. Of course with Peak Oil this could be as bad as their investment into derivatives a few years ago.
A few more volcanic eruptions in Iceland and ALL European airlines will be toast!