IFM builds private equity arm

The Australian firm has hired investment director Ashley Barker as its second addition to the newly-formed direct investment team.

Australia-based Industry Funds Management has hired Ashley Barker as investment director based in Sydney, according to a company statement. Barker joins from Bupa Australia, but has a history in private equity having worked as an investment director at Hastings Fund Management for eight years. 

The addition is part of IFM’s move to build a team for a direct investment platform to invest in Australia- and New Zealand-based businesses, according to Phillip Bower, who will serve as head of the direct investments team. 

IFM is yet to launch the vehicle, but is in on-going discussions with investors about how to develop the offering. The direct investments team will be made up of three professionals, one of which is yet to be appointed, although the team is likely to grow over time, Bower told Private Equity International

We will buy what you would call boring, dull companies that just pump out cash

Phillip Bower

Currently, IFM’s private equity business operates under a fund of funds model. Bower explained the direct investment fund will act more like a traditional private equity fund. But it will invest in solid, profitable businesses that may generate lower returns while holding significantly less risk for investors.

While IFM typically invests in infrastructure, the direct investment fund will take stakes worth between A$250 million (€193 million; $254 million) and A$500 million in “infrastructure-like” businesses, including waste-management, transport, healthcare and other essential business services. 

“There are a number of businesses in Australia that are unloved because the returns are good or exceptional, but the growth rate is not strong,” Bower said. “What IFM is doing is building a team of people with expertise in operations, deals and private equity all together and leveraging the expertise IFM already has to acquire some of those businesses.”

He continued, “We will buy what you would call boring, dull companies that just pump out cash. A typical private equity firm will look at [these] businesses and say ‘that’s a fantastic business, I just can’t see the growth curve and to get my 25 percent IRR. I need the growth’. We will be saying that it is a solid performing business where the cash comes in every year. It may not have the high growth, but it will provide more certainty so less risk for investors.”

Industry Funds Management is an Australia-based global investment manager with A$44 billion in assets under management, according to the firm. It has offices in Sydney, London and New York and has historically been a fund of funds business serving institutional investors. IFM is owned by 30 major not-for-profit Australian pension funds.