13th June 2024

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Business Industry and Financial

APG and ADIA fund Indonesian infrastructure investment

Two of the world’s largest institutional investors have made an allocation to Indonesia’s toll road platform, furthering their commitment to long-term, real asset opportunities.

APG, one of the world’s largest pension fund investors, and the Abu Dhabi Investment Authority, the emirate’s sovereign wealth fund, have bought into a key element of Indonesia’s transport network, alongside the country’s own national capital pool.

APG said the move aimed to unlock a new level of advancement for Indonesia’s economy “by providing connectivity between developing rural and urban regions through quality infrastructure”.

Hans-Martin Aerts, head of infrastructure and natural resources at APG Asia-Pacific, explained the transformative journey these investments will have on the emerging economy.

“Infrastructure remains a foundational need for supporting the region’s economic growth and delivers stable, risk-adjusted returns for the benefit of APG’s pension fund clients and their participants,” he said.

The players

APG is the world’s largest pure-play pension fund investor, with more than $571.2 billion (€521 billion) in assets under management for a range of clients, including the Dutch pension fund for civil servants and education professionals ABP.

It runs more than $26.3 billion (€24 billion) through its infrastructure portfolio, which claims a 10.2% five-year return rate.

Khadem Alremeithi, executive director of the infrastructure department at ADIA, said its aim was to support the fast-paced industrialization of the area while achieving value creation.

“As one of the world’s fastest growing economies, Indonesia is developing its infrastructure to support increased industrialization and more efficient supply chains.

“The Trans Java Toll Road is a key part of these plans,” he said.

ADIA is the sovereign wealth fund of Abu Dhabi. It was founded in 1976 and does not disclose its assets under management, although industry estimates put the figure to be more than $700bn. According to latest data, the fund has a target infrastructure allocation of between 2% and 7% of its entire portfolio. It already owns projects in Australia, North America and India.

The project

Both parties have invested in the Trans Java Toll Road sections of Kanci-Pejagan and Pejagan-Pemalang. These sections are the initial seed assets for the platform, which is targeting up to $2.75 billion in investment opportunities in Indonesia’s toll road networks, according to statement from the group.

APG and ADIA said they were aligned with the Indonesian Investment Authority’s (INA) strategic objectives to diversify risk and optimise capital allocation, bolstering a long-term infrastructural landscape.

Ridha Wirakusumah, CEO of INA said the platform integrated “the world-class expertise and robust track records of our partners in global toll road investments into Indonesia’s infrastructure landscape”.

“By welcoming APG and ADIA as shareholders, we aim to bolster our capacity to support and advance strategic national development projects, which is anticipated to yield significant economic benefits and propel Indonesia into a future of connectivity and prosperity,” he said.

INA was founded by the Indonesian government in 2021 and manages more than $9 billion, according to its website.

The backdrop

Amid uncertainty around interest rates, inflation, and the global economy more broadly, infrastructure investors have remained committed to infrastructure.

In December, asset manager Brookfield announced it had raised $28 billion for its largest ever infrastructure fund. Schroders revealed in October that institutional investors responding to its annual survey claimed infrastructure and real estate, along with other private asset opportunities, were the areas to which they were most likely add to in the coming year and beyond.

These same 770 investors identified infrastructure (44%) as the “best-suited asset classes within private assets to deliver their sustainability and impact objectives, with this focus growing as their investment timeframe extends”.