The Chief Investment Officer, Stanbic IBTC Infrastructure Fund, Dolu Olugbenjo, in this interview speaks on the recently launched N100 billion Infrastructure Fund, the bank’s experience as an asset manager, among others. Excerpts:
Stanbic IBTC Asset Management recently launched a N100 billion Infrastructure Fund as an alternative investment outlet for institutional investors seeking long term sustainable investment opportunities and returns. Can you tell us more about the Fund?
Yes, we launched a N100 billion Infrastructure Fund aimed at supporting efforts to close the infrastructure gap by linking investors with long term capital to infrastructure project developers and sponsors. The fund will provide long term capital to project sponsors and ensure that the investment terms enable development of projects, rather than stifling them.
You are targeting N20 billion for the first tranche, which will have a term of up to 12 years. How many tranches are planned and at what intervals?
The first tranche is for N20 billion and will be invested in energy, healthcare, and communications. We also have a robust pipeline of deals in various stages and as we conclude those deals and get approvals, we will raise additional tranches. We expect that about seven tranches will get us fully invested.
It is easy to deduce the rationale behind introduction of the Fund, given that infrastructure development remains a challenge in the country. Can you shed more light on the likely sectors and projects the Fund will be invested in?
Recent data puts Nigeria’s infrastructure stock at 25 per cent of Gross Domestic Product (GDP) compared with 70 per cent which is the international benchmark. Average annual budgeted infrastructure spend is about 10 per cent of annual requirement, with $3 trillion required to close the infrastructure gap over the next 30 years. These data references highlight the need for urgent and concerted efforts at solving the problem. We also know that government earnings have come under some constraints in recent times, hence why as market operators, we need to support innovative solutions that can help to solve some of these problems. The Fund will enable infrastructure investments across core infrastructure sectors such as energy (think entire power ecosystem including gas generation and distribution infrastructure), telecommunications, healthcare, water treatment, waste management, and transportation (road, rail, ports), and so on.
Considering the volatile economic and investment environment due largely to the coronavirus, do you feel the appetite for a Fund like this exists?
The pandemic exposed the vulnerabilities of economies across the world and Nigeria is no different. However, it also provides an opportunity for new areas of growth for these economies. For instance, the United States of America is negotiating $1.2 trillion infrastructure plan and there are other countries that have announced plans or are developing their plans. These initiatives will bode well for investors as they will bring to the fore many more opportunities for investments beyond the traditional investment propositions. For the Stanbic IBTC Infrastructure Fund in particular, we believe investors are indeed waiting for a fund such as this and there is appetite in the market for an infrastructure-dedicated fund.
Why should investors choose to invest in the Stanbic IBTC Infrastructure Fund as opposed to other options in the market?
Stanbic IBTC Infrastructure Fund has been floated by Stanbic IBTC Asset Management, an entity with deep investment management experience spanning more than two decades. Our focus on meeting the needs of our investors have made Nigerians trust us with their capital and we do not take that trust for granted. It is a contract we value wholesomely.
Specifically, Stanbic IBTC Infrastructure Fund will provide an avenue for investors to gain exposure to critical infrastructure projects while ensuring that risks are mitigated and there are commensurate returns for the risks assumed.
It will provide the requisite transparency via a governance framework to ensure that investors are kept aware of the investments the Fund makes. Beyond return and risks dynamics, the Fund will make investments that have positive multiplier effects particularly in the areas of social and environmental benefits. It will ensure sustainability is at the core of its philosophy and these are themes that resonate within the investment community.
Considering that inflation rate is significantly high now, what type of returns do you expect would motivate investors considering the Fund?
We have observed that safety of capital is as important as returns. Our objective is to deliver long term returns above the comparable government benchmark which theoretically is the safest long-term investment option in the market, while ensuring that risk is within a reasonable threshold. We believe that our ability to consistently deliver on this mandate will encourage investors to come on board.
Stanbic IBTC Asset Management manages some of the highest performing mutual funds in Nigeria, including the newly introduced Stanbic IBTC Enhanced Fixed Income Fund and the Stanbic IBTC Money Market Fund. Your pedigree in funds management is not in doubt. Can you briefly describe some of the milestones the company has accomplished and what you envisage is the growth prospect for the newly introduced Infrastructure Fund?
Stanbic IBTC Asset Management has a total of 16 Collective Investment Schemes (CIS), which is the highest pool managed by any Securities and Exchange (SEC) registered Fund Manager in Nigeria. The suite of Funds that we offer provides diverse options to investors with different risk appetites and these products are also suitable for different market conditions, allowing investors freely rotate between strategies, depending on the market outlook. In addition, three of the Funds have assets over N100 billion which is a testament to the confidence that investors have in our organisation. The growth prospect for the Infrastructure Fund is based on an optimal mix of opportunity and skill. Opportunity in the sense of infrastructure gap that exists in the market, and skill of the Fund Manager in providing tangible solutions via careful and rigorous deal selection processes; robust investment analyses and investment management processes; as well as best practices in governance framework. We believe protection of investors’ interest always wins in the long run and that will remain the clearest path to growth.
Stanbic IBTC is a leading end-to-end financial services organisation in the country, with subsidiaries offering a broad range of financial solutions. How well has Stanbic IBTC Asset Management supported clients through the other solutions offered by the Group?
As an Investment Manager, one of our objectives is to be at the cutting edge of innovation, be thought leaders and prioritise collaboration so that we can optimally serve our clients and ensure their expectations are met. We believe we are doing this within the ambit of existing regulations, and we will continue to seek optimal ways of leveraging Group strengths and capabilities for the benefit of our clients
A couple of years ago, you achieved Assets under Management (AuM) for your various funds of around N600 billion, highlighting Stanbic IBTC Asset Management’s industry leadership. What is the total size of your AuM now?
The total AuM is currently in excess of N780 billion and this is spread across retail, high net worth individuals (HNIs) and institutional investors.
What is your assessment of the investment environment in the country as we gradually put the coronavirus problems behind us?
Unfortunately, the investment environment may still be characterised by uncertainty even after the pandemic as there are pending structural matters that need to be addressed to unlock a period of sustained growth and development. So, while bringing the pandemic under control will be positive for the investment environment, it isn’t a magic wand. Regardless, recent efforts such as the seeding of the InfraCorp initiative with N1 trillion InfraCorp by the trio of Central Bank of Nigeria (CBN), Nigerian Sovereign Investment Authority and African Finance Corporation, as well as the Highway Development Management Initiative of the Federal Ministry of Works and Housing – which seeks to concession 12 major roads across the country – are steps in the right direction.