Why did Profond decide to increase its allocation to infrastructure assets?
Marcel Jörger: There were two main reasons in our case. Our investment strategy involves holding almost 50% of our portfolio in equities, which is quite high for a Swiss pension fund, but it has helped us achieve excellent long‑term performance – we have averaged 5.4% a year over the past 30 years. Infrastructure has relatively low correlation to other asset classes, and it has low volatility, which means that it can play a valuable role in our portfolio because it enables us to hold more volatile assets such as equities alongside it. So our infrastructure allocation plays an important role in moderating the overall volatility of our portfolio. But we also want to hold infrastructure because the returns, in terms of both capital growth and income, are attractive when you compare them to traditional asset classes such as fixed income or even Swiss real estate.
Felix Signorell: Many European pension funds, including Profond, have historically had very low allocations to alternative investments involving infrastructure, which means there is plenty of scope to increase that exposure. A lot of them are now considering infrastructure because the risk/reward profile is very attractive for these investors. This is a fast‑growing part of Ardian Customized Solutions’ offering.
What made a customized investment solution the best way for Profond to increase its exposure to infrastructure?
MJ: Around seven years ago Profond was investing directly in infrastructure including wind farms and solar parks, but we realized that managing infrastructure assets is not the core business of a pension fund. We reviewed our strategy and decided to change our investment process and switch to indirect infrastructure investments. That was why we started looking for potential partners to manage our infrastructure exposure for us. Moving to a customized solution has allowed us to tailor our individual asset allocation within the infrastructure segment, based on the recommendations of the team at Ardian, and to delegate manager selection and other technical aspects to experts. It professionalizes the whole process and simplifies our workload.
FS: The other big advantage of a customized solution is that it has given Profond a lot of flexibility. This allowed us to create a fully tailored portfolio for them with a flexible allocation to both third‑party and Ardian Infrastructure funds and access to our leading secondary platform combined with direct and secondary co‑investments. This helped us mitigate the J‑curve effect as well as to achieve a fast ramp‑up of the NAV and allowed Profond to meet their return objectives in the early years of the program.
Why was Ardian the right solutions partner for Profond?
FS: We offered the full range of customized solution services including set‑up of a dedicated vehicle and our ability to provide reporting fully tailored to the needs of Profond. On the investment side, we started the program with a secondary co‑investment in one of the largest infrastructure secondary transactions at that time, giving immediate access to a diversified portfolio of funds and direct co‑investments managed by blue chip infrastructure managers. Innovative thinking and Ardian’s history of investing in and operating infrastructure assets since 2005, were important factors.
MJ: It was very important to be able to include the right proportion of secondary assets in our customized solution to mitigate the J‑curve effect, and Ardian found a good way to achieve this. But other aspects of our partnership with them were also important. We wanted to work with a partner that had a local presence in Zurich and that had experience with Swiss institutional clients since we have some special requirements in areas such as reporting. And we liked the fact that they have high ESG standards both in their investments and at the corporate level. When we put all of that together, we saw that Ardian could offer an integrated, fully customized investment solution with the asset mix that we wanted and a genuinely global reach.
