AIMCo's Ben Hawkins on the Success of AirTrunk Sale and More
Amid all the headlines surrounding September’s Blackstone-led A$24 billion ($15.4 billion; €13.6 billion) acquisition of data centre group AirTrunk, was a Canadian institutional investor success story. PSP Investments was one of the original acquirers in 2020, alongside Macquarie Asset Management, while CPP Investments would join Blackstone in the new ownership consortium.
However, compatriot sovereign wealth fund Alberta Investment Management Corporation was a winner of the process, albeit a more silent one. AIMCo had co-invested with Macquarie back in 2020 and five years later was left counting a “substantial” return that exceeded underwritten expectation, according to Ben Hawkins, AIMCo’s executive managing director and global head of infrastructure, renewable resources and energy transition.
Hawkins declined to state exactly what “substantial” meant, although sources have told Infrastructure Investor that it could be as much as about 30 percent.
“We bought into the thesis that AirTrunk would be able to potentially grow in a fairly rapidly growing broader data center market, but also in a rapidly growing part of the world, and one which is actually pretty difficult to be successful in developing data centres,” Hawkins told Infrastructure Investor.
“Ultimately, the pandemic hit and created some tailwinds and then AI fuelled growth beyond that. When I think about that type of co-investment opportunity, it was an interesting mix of relatively straightforward infrastructure, cash-producing assets with15-year contracts but where the platform value has the potential of providing significant upside.”
As for future similar opportunities, Hawkins remains cautious, warning that parts of the data centre market are reminiscent of the renewable power market from years gone by.
“We think there’s interest and opportunities, but spend a lot of time really looking at the fundamentals as much as we can to try to evaluate the gap between the narratives that are being priced in in various places and just how much of a constraint power is,” he stated. “It does raise some questions just as to what really can be practically delivered in some of these markets and just highlights how critical having some answers to those questions are to continue to realise on this story.”
Still, Hawkins again acknowledged the fundamentals and said the market “certainly could have the potential to have a lot more room to surprise”.
AirTrunk, Hawkins said, was one of the stronger performing assets last year for AIMCo, whose infrastructure portfolio delivered a 12 percent return, it said last month, with a 12.7 percent return delivered over the last four years.
Other highlights were in the midstream sector, such as the 416 mile-long Coastal GasLink Pipeline in British Columbia, which it owns alongside KKR, and its 87 percent stake in midstream platform Howard Energy Partners.
“We’ve been big believers in natural gas as a long-term transition fuel for a long time and I don’t know if the market had fully endorsed our view through the last five years, but it definitely feels like they’ve come around in the last couple,” Hawkins said.
Coastal GasLink was a significant construction project, which reached mechanical completion in November 2023, while Howard Energy is a portfolio of operational pipelines.
“We don’t take the underlying commodity risk but look to a variety of contractual structures which provide a floor to the contracted volumes, but then also benefit when those volumes uptick,” Hawkins explained. “Both those elements deliver on value as you’d expect, it’s supposed to be infrastructure, but we like infrastructure which has a little bit of upside to it as well.”
Another highlight was one of AIMCo’s more recent investments: its 2022 acquisition of rail haulage group Cando Rail, based in Canada.
“They’ve been able to outperform what the normal GDP story would imply, but they’re also looking at further growth opportunities, so are hoping to expand that business model going forward,” Hawkins added.
Partnership model
The model through which AIMCo made its AirTrunk investment is relatively uncommon for the Canadian institution. Direct investments remain its primary investment approach, with about 85-90 percent of deals done on a direct basis, despite the co-investment success with Macquarie.
It has about C$19.8 billion ($14.3 billion; €12.7 billion) in infrastructure under management, comprising about 12 percent of the fund’s total portfolio.
“We came to realise that there were deals or regions in the world where we weren’t really as well-equipped to do direct deals and digital is one of those where we really value third-party managers, and in Asia as well,” Hawkins maintained.
“Co-investments are an important part of our broader strategy, but we’re highly selective, so there’s only a handful of managers that we work with and really try to find those which can complement what we do on a direct deal basis.”
However, AIMCo has found new deals difficult to come by, a theme going back about two years, and that has meant a repositioning of its focus.
“By and large, we’re trying to leverage our existing portfolio companies where we can to look to them as platforms,” Hawkins said.
“Our underlying portfolio companies have capabilities that we don’t have in-house, so we’re talking about their sector-specific expertise, boots on the ground and the broader capabilities and ability to source proprietary dealflow that wouldn’t necessarily come to us. They could be more organic in nature or bolt-on acquisitions that don’t really get a lot of attention, but in some ways that’s what makes it more interesting when they can pull that off.”
Riding the volatility
The difficulty in the search for new deals isn’t helped by today’s volatile market situation, a dynamic Hawkins said is shared by his fellow private markets colleagues.
“It feels like a lot of sellers have pulled their processes and are waiting for some of the uncertainty to dissipate, although I think infrastructure is, for the most part, pretty well insulated from some of the tariff noise and ideally where there’s inflation protection, even protected from some of the indirect consequences of some of the tariff uncertainty,” Hawkins maintained. “It still has had a bit of a chilling effect just in terms of transactions.”
Canada, of course, has been at the forefront of trade tensions with the US. Hawkins said about 10 percent of AIMCo’s infrastructure portfolio is in Canada, while close to half resides in its southern neighbour. Hawkins is bullish that the institution hasn’t had heightened concerns as a result of this and won’t be changing course.
“The US is just too important of a market to really be looking to adjust our approach, focus or even portfolio for that matter,” he said. Hawkins added that AIMCo is focused on redeploying capital from its AirTrunk sale in Asia, while it is still trying to find a new home in Europe for capital received from the sale of Spanish IPP Eolia Renovables to Engie in November 2021.
Back in Canada, the federal government in March opened up the possibility of bringing Canadian pension funds and institutional investors investing in the country’s airports. Would AIMCo, having been part of a Canadian-dominated consortium owning London City Airport since 2016, be interested?
“I think that could be really interesting to Canadian pension investors and probably much broader than that as well, and could be pretty sizeable. One could easily see a number of really large consortiums looking to participate,” he responded.
“That all said, it really comes down to the circumstances behind that, and it’s really hard to say when or if this comes together. I think if it ever did, I think you could see a pretty hotly contested process for parties trying to find a way into some of the larger assets and more strategic locations.”
Alright, this is an excellent interview with AIMCo's Ben Hawkings who I like and interviewed back in November 2022 (read my comment here).
I also covered Blackstone and CPP Investments's acquisition of AirTrunk for A$24bn here and at the time, the press releases stated the sellers were Macquarie Asset Management (MAM) and the Public Sector Pension Investment Board (PSP) so I didn't know AIMCo also co-invested in the initial acquisition of AirTrunk along with PSP.
As a reminder, back in April 2020, Macquarie Infrastructure and Real Assets (MIRA) led a consortium to buy an 88% stake in the A$3bn (€1.7bn) data centre firm AirTrunk.
The consortium, led by Macquarie Asia Infrastructure Fund 2 and including other MIRA-managed partners, acquired its stake in the business from Goldman Sachs, Sixth Street Partners and founder, Robin Khuda.
Obviously PSP Investments was the major co-investor on that deal and AIMCo a minor one but both organizations realized big gains when Blackstone and CPP Investments bought AirTrunk for A$24bn.And the red hot data centre space is showing no signs of abating, so I'm sure Blackstone and CPP Investments will also make great returns on AirTrunk.
Macquarie raked in A$1.3bn in performance fees on the sale and moved on.
Less than a month after selling its majority stake in AirTrunk, Macquarie Asset Management agreed to provide up to $5 billion in funding for US data centre startup Applied Digital.
In any case, both PSP and AIMCo made great returns on the sale of AirTrunk and PSP's CEO Deb Orida told me that being first mover in data centres really helped.
Back to Ben Hawkings, the article states he remains cautious, warning that parts of the data centre market are reminiscent of the renewable power market from years gone by:
“We think there’s interest and opportunities, but spend a lot of time really looking at the fundamentals as much as we can to try to evaluate the gap between the narratives that are being priced in in various places and just how much of a constraint power is,” he stated. “It does raise some questions just as to what really can be practically delivered in some of these markets and just highlights how critical having some answers to those questions are to continue to realise on this story.”
Still, Hawkins again acknowledged the fundamentals and said the market “certainly could have the potential to have a lot more room to surprise”.
Ben also states co-investments with a handful of strategic partners is how they capitalize on opportunities all over the world, especially in Asia (where their office in Singapore was closed so they need strong strategic partners).
Another thing I found interesting is how they're trying to leverage off their existing portfolio companies to use them as an extension of their investment team:
“Our underlying portfolio companies have capabilities that we don’t have in-house, so we’re talking about their sector-specific expertise, boots on the ground and the broader capabilities and ability to source proprietary dealflow that wouldn’t necessarily come to us. They could be more organic in nature or bolt-on acquisitions that don’t really get a lot of attention, but in some ways that’s what makes it more interesting when they can pull that off.”
On tariffs, he rightly notes that infrastructure is largely insulated and has embedded inflation protection but nonetheless, transactions have slowed considerably:
“It feels like a lot of sellers have pulled their processes and are waiting for some of the uncertainty to dissipate, although I think infrastructure is, for the most part, pretty well insulated from some of the tariff noise and ideally where there’s inflation protection, even protected from some of the indirect consequences of some of the tariff uncertainty,” Hawkins maintained. “It still has had a bit of a chilling effect just in terms of transactions.”
Alright, excellent interview with Ben Hawkings who is an excellent investment manager at AIMCo and a very nice and decent guy. Glad he's still around.
In other AIMCo news, Layan Odeh and Paula Sambo of Bloomberg report that they're looking for a new CIO amid push to expand Calgary office:
Alberta Investment Management Corp. is hunting for a new chief investment officer as it carries out an overhaul that began last year when the provincial government fired the board and its top executive.
The new CIO would be based in Calgary, the largest city in Alberta and the home of Canada’s major oil and gas companies. Edmonton-based Aimco is considering both internal and external candidates, according to people familiar with the matter, asking not to be identified because they weren’t authorized to speak publicly.
Four people held the CIO title at Aimco in less than four years. The most recent, Marlene Puffer, departed in September.
Aimco, which manages about $180 billion of pension capital and other money for the Canadian province, wants to increase its staff in Calgary to boost the city’s financial sector. Newly appointed Chief Legal Officer John Walsh works out of the Calgary office, which has about 70 of Aimco’s 680 employees.
“The size of the team in Calgary has grown and we’re looking for space to accommodate them,” Aimco spokesperson Carolyn Quick said.
The firm is also changing its remote-work policy, requiring employees to work from the office three times a week starting in January, the people said.
Aimco’s restructuring was set in motion on Nov. 7, when Alberta’s finance minister sacked the board, Chief Executive Officer Evan Siddall and three other executives, saying they had allowed expenses to soar to unacceptable levels. Ray Gilmour was named interim CEO and Stephen Harper, the former Canadian prime minister, was installed as chair.
Since then, the money manager’s global expansion, championed by Siddall, has reversed. It shuttered its offices in New York and Singapore and parted ways with David Scudellari, its global head of private assets, and Kevin Bong, the executive who ran the Singapore office.
Last month, Aimco laid off around a dozen employees and decided to freeze around 25 vacant roles, according to one of the people. Earlier this year, Aimco eliminated 19 jobs, including the role responsible for the diversity, equity and inclusion program.
Aimco produced a 12.6% return last year in its balanced fund, missing its benchmark of 13.4%. Its total fund return was 12.3%. But the fund’s results exceeded those of some peers in the so-called Maple Eight, such as Ontario Municipal Employees Retirement System and Ontario Teachers’ Pension Plan, which last year earned 8.3% and 9.4%, respectively.
Canada’s largest pension funds are under pressure to consider investing more in the domestic economy as the US wages a tariff war against its closest trading partners.
In addition to Edmonton and Calgary, Aimco has offices in Toronto, London and Luxembourg.
Let me be brief here. The best CIO AIMCo ever had was Dale MacMaster and never mind the much publicized vol blowup, he was exceptional and I talk to all of them.
I think there are excellent CIOs who can easily work out of the Calgary office but I'm a bit perplexed as to why they're not looking to first hire a CEO as Ray Gilmour was named interim CEO.
In my opinion, proper governance is you hire a CEO who is then in charge of hiring a CIO that reports to him or her.
It's sad to see more people were let go at AIMCo and I really hope all these cuts are justified and won't hurt the organization.
Let me end it there, it was a bit a whirlwind weekend and hard to believe that at this writing, Trump has announced a ceasefire between Iran and Israel.
Below, Mark Esper, Fmr. Secretary of Defense, joins 'Closing Bell Overtime' to talk Iran's latest missile strike on US targets in the Middle East. Next, President Trump said on Monday afternoon that Iran and Israel have agreed to a ceasefire between the two nations that have been exchanging air and missile strikes for over a week now. Iran launched a missile attack at a US base in Qatar today, after the US attacked Iran nuclear sites over the weekend with B2 Spirit bombers.
Also, Fox News chief political anchor Bret Baier breaks down what led to President Donald Trump announcing a ceasefire agreement between Israel and Iran on 'The Ingraham Angle.'
Iran’s Foreign Minister Seyed Abbas Araghchi on Monday refuted claims that Tehran had agreed to a US-brokered ceasefire deal with Israel, while signaling his country was ready to stop hostilities.
Let's hope this war ends fast and better days lie ahead for the Middle East.
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