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At QSuper’s recent member event, aQmen 2019, we hosted John Holland-Kaye, Chief Executive Officer of Heathrow Airport, and Brad Holzberger, QSuper’s Chief Investment Officer, to speak about QSuper’s investment in Heathrow Airport.
Heathrow Airport is QSuper’s largest infrastructure investment, with the fund owning an 11% share that has been purchased over two acquisitions. More than 250 QSuper members attended the event to learn about the investment, and many tuned in via live stream on our website.
Members had the chance to ask Brad and John questions about the investment – here’s what our members wanted to know about QSuper’s investment in Heathrow Airport.
Q: Where does QSuper’s investment in Heathrow Airport sit among the various investment options available for members to choose, and what sort of percentage might Heathrow be for each option?
QSuper’s Chief Investment Officer, Brad Holzberger, said QSuper’s investment in Heathrow Airport was in all of the fund’s diversified options – the Balanced, Moderate and Aggressive options as well as the default Lifetime option.
“Infrastructure is about 15% of our Balanced portfolio. Of that, Heathrow is about 3% of the Balanced option in total. The Moderate is half that. The Aggressive a little bit more,” Brad said.
“There is no exposure in any of the single equity options or the diversified equity option. It is right through the default Lifetime series too.
“At 3% of the balanced option you can see that this is a significant asset. It’s the biggest single exposure we have.”
Q: Will there be future opportunities to invest in Heathrow Airport?
Heathrow Airport Chief Executive Officer John Holland-Kaye answered this question, explaining that the airport’s expansion was a great opportunity for investors.
“Australia has one of the biggest investment fund markets in the world. There are relatively few high-quality assets that are available to be invested in globally and fund managers are diversifying all the time,” John said.
“The great thing you have with Heathrow is a high-quality asset that you’ve added to over the years. And as we expand you’ll be able to invest in that expansion.
“There’s several hundred million pounds that we’ll need to fund the expansion.”
Q: Heathrow Airport’s third runway is going to cost $14 billion – how is that going to be funded and what effect will that have on returns to QSuper?
John said that the third runway at Heathrow Airport would be entirely privately funded by a combination of equity and debt.
“There’s higher risk that comes with investing in a larger airport, particularly in traffic and construction costs, so we expect the returns to be higher than they’d otherwise be to cover the risk, so it should be value appreciative,” he said.
Brad added that the expansion was something QSuper needed to consider from the investment perspective.
“We need to see a proper, thorough, regulatory environment and a successful play, and the economics of [the investment],” Brad said.
“John and his team are the conduit to the regulators and other constituents in the UK who have to bring all this together. But there’s no point for anybody [to invest] if we don’t get commensurate returns with the risk and I think the UK understands that and they are benefitting from the investment that you make.”
Q: Since becoming an open fund, has the way that QSuper invests changed at all?
Brad said that being an open fund had not changed the way QSuper invested.
“The issue of an open fund is that we think the fund is going to grow faster, but it was already growing faster,” he said.
“One of the things we’ve been building is contingency plans around growth and thinking about where we’re going to invest – not only in these types of assets but right across the spectrum of the assets that we invest in.”
Brad said that being an open fund should not make any difference at all.
“To the extent that it challenges QSuper by the fund growing – that is exactly what we’re capable of doing. The fund has grown to $80 billion and there’s every likelihood that will grow to $200 billion. That’s what the contingency plans we are writing are aimed at,” he said.
“We know exactly what that pathway is and it’s great that we can invite more people to enjoy the benefits that the QSuper fund has to offer.”
You can find out more about QSuper’s investment in Heathrow Airport.
It’s your opportunity to hear first-hand from senior members of the QSuper investments team.
The views of the author are not necessarily the views of the QSuper Board. We’ve put this information together as general information only and you should get professional advice before relying on this information. Each of our investment options has a different objective, risk profile, and asset allocation.
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