16 February 2021
With its open markets and transparent regulatory environment, set against a history of international engagement and entrepreneurialism, the Benelux region is increasingly attracting more inward investment, while its own residents are increasingly looking for opportunities abroad.
“There are significant institutional savings pools in the region, with large domestic insurance companies and pension funds seeking opportunities to deploy capital both in-market and further afield,” says Tom van Rijsewijk, a managing director in Macquarie's Asset Management private credit business. "Infrastructure equity has been around for some time and popular amongst local investors. But more recently, we’ve seen a growing interest from the region's investors in infrastructure debt, and alongside it, a desire to partner with Macquarie and leverage our global platform when investing in the asset class internationally.”
In January, Macquarie Asset Management secured a €1.25 billion mandate from Dutch asset manager MN to invest in infrastructure debt on behalf of Pensioenfonds Metaal & Techniek and Pensioenfonds Metalektro. The mandate represented the first allocations to the asset class by the two Dutch pension funds, which manage more than €143 billion for employees and businesses in the country's metal industry.
"In some cases, these investors are using infrastructure debt to help diversify their portfolios - replacing assets they would have traditionally been heavily invested in, such as corporate bonds, with similarly stable assets but with the potential for higher returns," explains Mr van Rijsewijk. "The benefit for these pension funds is access to regular, long-term income streams that match their long-dated liabilities. For the issuers of infrastructure debt, accessing this institutional investment enables them to secure longer-term investment to develop their businesses. The role of Macquarie is to bring these two sides of the equation together".
Bringing global expertise to the Benelux region is something Macquarie has been doing since opening its Amsterdam office in 2006. In 2017, the Group played a role in the growth of the Dutch private rental market, by supporting the launch of Domivest, the Netherlands first specialised lender providing buy-to-let (BTL) mortgages to professional landlords.
As Gianfranco Simionato, head of EMEA fixed income in Macquarie's Commodities and Global Markets business, explains "in the wake of the financial crisis, mortgage underwriting for new owner-occupied house purchases in the Netherlands was tightened. This change, in combination with social changes and population growth, lead to increased demand for flexible housing solutions away from traditional home ownership. As a BTL lender, Domivest provided mortgages to professional property investors to supply high quality rental accommodation to tenants in the region. Macquarie enabled Domivest to raise debt funds when it arranged the first dedicated residential BTL securitisation in mainland Europe. By attracting international investment, Domivest is providing greater housing choices to individuals in addition to the existing social housing sector and home ownership," continues Mr. Simionato.
With Macquarie's support, Domivest is studying mortgages that target Environmental, Social and Governance (ESG) factors. “Through the capital markets, we are exploring ways Domivest can incentivise mortgage borrowers to improve the energy efficiency of properties or to appeal to the lower income part of the rental market by offering more attractive mortgage rates in return,” he says.
Willem Stitselaar, head of Macquarie Capital’s Benelux infrastructure and energy group in Amsterdam, also points to growing interest from international investors in the region's green energy sector and digital infrastructure. "Globally, COVID-19 has driven the growth of streaming services and the move towards remote working over the past year, has increased demand for connectivity. For the Benelux, and Belgium in particular, this has created demand for data centres and glass fibre connections. The emergence of Amsterdam as a technology hub is another driver of rapid digital infrastructure growth,” he explains.
“The level and pace of this growth will require significant investment, and that’s where we come in to help identify or create these opportunities and make projects happen, by structuring that development capital.”
In the Netherlands, Macquarie’s Green Investment Group is supporting the country's ability to harness offshore wind power and is also investing in rapidly expanding renewable technologies and fuel sources, such as hydrogen. “The region is experiencing a monumental shift in the renewables and low-carbon sector. One example of this growth is in Amsterdam, which is Europe’s largest share trading centre and is now set to be the hub for European carbon trading,” continues Mr Stitselaar.
Fokke Eijsink, head of Benelux M&A for Macquarie Capital's advisory and capital solutions business suggests that in the present environment, investors need agility and flexibility due to the increased uncertainty and volatility in markets prompted by COVID-19. “Sectors that are currently buoyant such as tech, software and healthcare remain popular, but we’re still seeing interest in the more traditional sectors such as industrials, consumer and infrastructure especially for stable and resilient businesses. Moreover, even in sectors that are facing challenges, there are opportunities for leading, well-capitalised players to streamline their operations and bolster their market position by acquiring smaller, associated businesses.”
The region has historically hosted an active Private Equity (PE) sector with a high level of deal flow, but this trend is accelerating as PEs continue to accumulate dry powder and the speed of the investment cycle is advancing rapidly as Fokke Eijsink explains: “PEs are keen to deploy money and invest in quality businesses, and the stable political and regulatory climate fuels inbound investments and supports cross-border activity. In addition, while PE investors used to maintain a holding for five or six years, today the period will more likely be just two or three, driving M&A activity.”
With the range of investments growing and new opportunities emerging, more investors are coming to appreciate Macquarie’s range of flexible financing solutions and the strong balance sheet that it can use to support its clients’ goals.
Whether they are focussed on the region or looking beyond it, Benelux investors’ understanding of ESG considerations is advanced. Macquarie’s role in enabling investors to achieve these requirements is shaping the strategies it brings to market, according to Brian Sparkes, an investment director within Macquarie Asset Management in Luxembourg. “While investors in the region have long been focused on ESG, our concern is now also increasingly on stewardship and how we operate as a business owner.”
“We regard ourselves as stewards of capital, integrating ESG considerations into our decision-making process, extensively engaging with and monitoring the companies that we’re investing in to ensure that they’re doing what we’d expect them to do. It’s about adding value to our clients’ portfolios, but also to society as a whole,” he says.
Macquarie Asset Management recently announced its plans to invest and manage its portfolio in line with net zero emissions by 2040, 10 years ahead of the goals outlined under the Paris Agreement. Macquarie Asset Management's 15-year investment in Brussels Airport, during which time more than €1 billion was invested to expand capacity and achieve carbon neutrality, shows how managers can take the lead on ESG issues on behalf of their investors. But clients are increasingly likely to have own their own ESG expectations and goals, and so Macquarie is now creating investment solutions across both public and private markets tailored to these needs.
“Macquarie is well known in Europe for its infrastructure know-how, but now our clients are increasingly coming to us for our public markets capabilities,” says Sparkes. “Offering access to both public and private markets is an attractive proposition, and they like the fact that we take a client-centric approach.”
As well as focussing on its areas of expertise, Macquarie’s breadth of experience, combined with its local knowledge and global reach is well matched to the entrepreneurial spirit and diversified economy of the Benelux region.