CP2 Seeks to Quadruple Infrastructure Assets With Buffett-Style Investing

CP2 Ltd., the Australian fund manager that was part of a failed attempt to acquire toll-road operator Transurban Group, is seeking to quadruple funds under management as it bets on growth in infrastructure assets.

CP2, whose main investments are in toll roads, is aiming to attract sovereign wealth funds and government pension plans to swell assets to A$8 billion ($6.7 billion) in two years, from about A$2 billion now, said Peter Doherty, the Sydney-based company’s managing director.

Sovereign funds and pension pools -- including the Canada Pension Plan Investment Board and the Ontario Teachers’ Pension Plan, CP2’s partners in the Transurban bid -- are seeking long- term investments such as toll roads and ports to meet payment obligations. The world is facing a $2 trillion a year infrastructure deficit, according to a World Economic Forum report last month.

“We’re very firmly focused on long-term, boring assets,” Doherty said in an interview. “We’re not a slash-and-burn, we’re a build. We’re more Buffett-like than private equity.”

Billionaire investor Warren Buffett is known for his buy- and-hold strategy, which focuses on long-term profit. Buffett completed the purchase of Fort Worth, Texas-based Burlington Northern Santa Fe Corp. in February to provide income for his company Berkshire Hathaway Inc. after his tenure as chairman, chief executive officer and biggest shareholder ends.

Long Horizon

“I have a 40-year time horizon,” Doherty said. “So, what am I going to do with my money 40 years out? That’s what we try to encourage our clients, to think about that horizon as well.”

CP2 has shown this strategy works well for the company, Matthew Spence, an analyst at Bank of America Corp. Merrill Lynch said in a telephone interview today.

“That’s been their strategy over the last few years, and they distinguish themselves with their long investment horizon,” Spence said.

CP2 is on the lookout for distressed assets around the world, and sees opportunities in Europe, Doherty said. CP2 has about A$500 million to spend on transport infrastructure assets without adding new clients or additional funding, he said.

After monitoring Melbourne-based ConnectEast Group for four years, the fund manager has been gradually increasing its stake in the Australian toll-road operator and now owns a little more than a third of the company. While CP2 will maintain its holding in ConnectEast, it sees no need to acquire the company, Doherty said.

ConnectEast

“We’ve reduced all the risk in ConnectEast now,” Doherty said. “Infrastructure companies, the worst thing they can do is go and pay too much for an asset. Then, the second worst thing, issue stock at below value. ConnectEast can’t do that now because we have such a large stake.”

CP2 will keep its stake in Transurban and push for changes to the company’s board, Doherty said on May 28.

Melbourne-based Transurban rejected a joint A$7.2 billion bid by the fund manager, the Canada Pension Plan and Ontario Teachers’ last month.

Doherty and his wife Sally Holloway created CP2, then Capital Partners, in 1997 to provide investment advice to mutual and pension funds, according to the company’s website. The company became an investment manager in 2005 with an infrastructure mandate from the New Zealand Superannuation fund, it said in a media brief. Today, it invests in transport infrastructure assets in Australia, the U.S., Switzerland and the U.K.

To contact the reporter on this story: Nichola Saminather in Sydney at nsaminather1@bloomberg.net

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