Strategy & Investment Policy

Value Preservation

The principal goal of active management is to ensure that the operations and performance of each project are delivered in accordance with client expectations – and, consequently, achieve HICL's anticipated (or ‘base case’) investment return. A member of InfraRed's Asset Management function is represented on each project company’s board and plays a proactive role in the management of the project. He or she will engage with both client and supply chain contractors regularly to build and maintain open stakeholder relationships at project company level to ensure smooth delivery of services and appropriate project performance.

Value Enhancements

Value enhancements are identified from performance reviews of the portfolio. Plans are developed and implemented that cover incremental revenue opportunities, cost savings, treasury management and financial efficiencies, and occur both on an asset-specific or portfolio-wide basis depending on the particular initiative. Efficiencies and savings will only be implemented where they do not impact on either the services being provided or the quality of the service level delivery. These opportunities, when realised, are typically shared with the project’s client.

Accretive Investment

Any new investment must meet the Acquisition Strategy which the Company publishes annually in the Report & Accounts, as well as the over-arching restrictions and caps imposed by the Investment Policy. Further, all new investments need to support the achievement of the investment objectives – see Why Invest With HICL. A key aspect in this regard is to acquire new investments which are value accretive to the current portfolio - achieved through their initial gross yield, potential total return, and/or degree of positive inflation correlation.

Acquisition Strategy

HICL’s key objective is to deliver long-term income to its shareholders, produced from a portfolio of infrastructure investments positioned at the lower end of the risk spectrum.  This objective informs the Company’s Acquisition Strategy, which seeks to grow the portfolio by adding investments that are compatible with the Company’s risk-reward proposition.

Investment activity is focused on three market segments:

  • Public-Private Partnerships (PPPs/P3s): projects that receive availability-based payments from public sector counterparties, for example schools, hospitals and roads;
  • Regulated assets: businesses that are subject to regulatory price controls, for example energy transmission and distribution (gas and electricity) and water utilities; and
  • Demand-based assets: projects where revenues are dependent on end-user demand but where revenue risk is mitigated, for example operational toll roads (with traffic history) and student accommodation.

Geographically, the Company is focused on developed markets such as the UK, North America, Australasia, Asia and certain countries in Europe.  Countries outside these regions might be considered by the Investment Manager but only after prior discussion with, and agreement from, the Board.

The Board reviews HICL’s Acquisition Strategy on an annual basis and is responsible for setting the Company’s risk appetite.  The Risk Committee monitors the Company’s risk profile, by reference to its risk appetite statement, on an annual basis.

  • Characteristics and Structural Arrangements

    Learn more about the different subsets of the infrastructure asset class – social, economic and renewable energy projects – and their characteristics, as well as how the private sector’s involvement is organised and its investment is structured.

  • The Investment Case

    Read about the rationale for investment in each subset of the infrastructure asset class, as well as the inflation-protected return to equity and cashflow profile of a typical HICL investment.

  • Making an Investment

    Learn about how InfraRed’s infrastructure Strategy & Origination professionals progress investments on behalf of HICL, how these investments are sourced and financed, as well as aspects of the underwriting process.