The Global Infrastructure strategy aims to provide investors with attractive risk-adjusted returns comprised of income and capital appreciation by investing in a portfolio of core/core+ global private infrastructure assets, diversified by sector and geography, with a focus on developed market countries included in the Organization for Economic Co-operation and Development (OECD).

The strategy provides investors with direct access to a globally diversified portfolio of core/core+ private infrastructure assets alongside experienced and aligned co-investment partners. It is structured as an evergreen strategy, which allows for continuous investment over time and strongly aligns with the objectives of long-term value creation and a philosophy of responsible investment.

Strategy overview

• Invests in a portfolio of core/core+ global private infrastructure assets.
• Managed by the RBC GAM Private Markets Global Infrastructure Investment team with a focus on responsible investing and long-term value creation within a robust governance structure.
• Multi-year deployment program targets diversification by sector and geography, with a focus on developed market countries included in the Organization for Economic Co-operation and Development (OECD).
• Global origination network aims to generate a robust pipeline of diverse and scalable transactions.
• Evergreen structure aligns investor capital with the long asset lives of private infrastructure assets.

Asset class overview

Private infrastructure assets are tangible assets that support economic activity and daily life. They include assets such as airports, electrical utilities, and mobile phone towers. Importantly, infrastructure assets typically provide end users with essential products or services that generate stable and predictable cash flows for investors. Private infrastructure assets can provide stable income, inflation protection, an illiquidity (return) premium, and low correlations to traditional asset classes, all of which may make this asset class an attractive addition to a diversified portfolio. It can also offer exposure to positive environmental, social, and governance (“ESG”) themes, as these investments often support economic development, enable higher standards of living, and drive the transition to a more sustainable future.

Our approach

Investment philosophy and style

The strategy’s investment program is focused on core/core+ private infrastructure assets located in global developed market geographies. The strategy targets assets that will allow the strategy to benefit from significant evolving infrastructure trends such as energy and utility transition, global digitalization, transportation evolution, and social infrastructure demand. The strategy will emphasize the following factors, which the RBC GAM Private Markets Global Infrastructure Investment team believes will support the generation of attractive risk-adjusted returns:

1. Investment Selection – The strategy aims to invest in high-quality private infrastructure assets that will provide stable and predictable cash flows over a long-term investment horizon. The strategy will seek to identify investments likely to benefit from attractive economic growth, positive demographic trends, strong and consistent contractual income returns, inflation sensitivity in regions with predictable regulation, and tested rule of law.
2. Partner Selection – The strategy seeks co-investment partners that are experienced with respect to sourcing and executing infrastructure investment opportunities and with strong reputations as infrastructure asset managers/owners. These partners will also be aligned with respect to values and outlook, and as long-term investors with significant equity investments and a demonstrated track record of value creation.
3. Portfolio Design – The strategy seeks to achieve a diversified portfolio across multiple infrastructure sectors (including energy, utilities, transport, digital, and social) and geographies (OECD member countries) with a focus on forward-looking global themes and trends.

The strategy also incorporates material environmental, social, and governance factors as part of the investment process to consider issuers’ oversight and management of these factors.

Investment process

A disciplined and replicable investment process is a fundamental requirement of this private markets strategy. The investment process is comprised of five major steps, described below.

1. Development of the investment strategy and portfolio construction: This includes establishing desired geographic and sector exposures, ensuring diversification across the portfolio, developing investment policies, and negotiating governance arrangements with co-investment partners.
2. Investment selection: The strategy identifies and selects investment opportunities from a proprietary global network which is augmented by co-investment partners. This produces a deep and diversified pipeline of investment opportunities for the strategy to consider.
3. Investment approvals: Investments are assessed through a multi-stage due diligence process which considers the investment opportunity, transaction dynamics, and portfolio fit. Risks are analysed to consider pricing implications or mitigation plans. A small selection of investments will clear this rigorous process and, with the recommendation of the RBC GAM Private Markets Global Infrastructure Investment team, an investment decision is subject to RBC GAM Infrastructure Investment Committee approval. The team works closely with co-investment partners and external advisors through this due diligence process.
4. Investment management and reporting: The RBC GAM Private Markets Global Infrastructure Investment team works alongside co-investment partners and the executive management team of the investments to execute on responsible value creation plans, while ensuring timely and accurate reporting of investment performance.
5. Exit: Although the strategy will result in long-term hold periods of assets, the RBC GAM Private Markets Global Infrastructure Investment team monitors and regularly assess the opportunity to exit any investment. The strategy ensures discretion over the disposition of assets to provide liquidity (if needed) or to realize value for investors.

Each step in the Investment Process benefits from an experienced team of professionals specializing in private infrastructure investments, which is significantly augmented by the other research and investment capabilities within RBC Global Asset Management (RBC GAM). The RBC GAM Infrastructure Investment Committee serves as an oversight body with respect to the strategy and its assets.

Portfolio construction

The RBC GAM Private Markets Global Infrastructure Investment team chooses private infrastructure assets for investment that it believes will provide strong risk-adjusted returns for the strategy.

The team is focused on assembling a diversified portfolio of private infrastructure assets that can provide a balance between:

• Income and growth;
• Greenfield (development) and brownfield (operating) assets; and,
• Contractual (passive) income and opportunities for value-creation through active management.

The strategy is focused on a building a diversified core/core+ overall risk profile and will invest primarily in core and core+ assets, with limited exposure to more opportunistic and value add infrastructure assets.

• Core infrastructure assets represent one of the lowest risk profiles within the sector. Core assets may include essential services that are often in natural monopoly positions.
• Core+ assets are slightly higher in risk profile and are exposed to additional business risks. Core+ assets allow for enhanced value creation and the potential for higher returns.
• Value-add and opportunistic infrastructure assets tend to be the highest risk category for this asset class. These assets have typical business risks, as they operate in an adjacency to a core or core-plus asset.

A number of “Infrastructure 2.0” investable themes include (but are not limited to) the following:

• Reducing carbon emissions and lower carbon industries;
• Growth in utilities (e.g., electricity, gas, and water), including “smart grid” investment that are required to connect renewable power generation;
• Resilience and accessibility in critical transportation infrastructure;
• Essential nature of digital communications infrastructure;
• Municipal and social projects developed alongside governments in public-private partnerships (PPPs).

The portfolio is constructed via a robust pipeline of diverse and scalable transactions driven by a global origination network that:

• Leverages the advantages of Royal Bank of Canada’s global presence and the expertise of our co-investment partners;
• Focuses on regions with predictable regulation, tested rule of law, and a depth of capable advisors and management teams; and
• Prioritizes ESG-related benefits (including, for instance, strong anti-bribery and corruption practices).