Future Fund plans purchase of Australian Infrastructure Fund assets

The Future Fund will acquire all of the Australian Infrastructure Fund (AIX)'s portfolio assets (largely made up of airport assets) under a Memorandum of Understanding (MOU) the pair has entered into.

The agreement forms part of the Future Fund's infrastructure program and expands on its Tangible Assets program which it has been beefing up over the past five years.

The infrastructure program is valued at $4.3 billion and constitutes 5.6 per cent of Future Fund's portfolio.

The acquisition will increase its direct exposure to domestic infrastructure assets, which includes a 16.8 per cent share in the Australia Pacific Airports Corporation.

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AIX will earn a 10 per cent premium from the $2 billion deal on the published valuation of its assets as at 30 June 2012, the Future Fund said.

It has reached an advanced stage in efforts to internalise its management structure which was announced in June and which AIX will manage with Australian Infrastructure Fund until the binding sale and purchase agreement for assets is executed.

Chief investment officer for Future Fund David Neal said the fund would continue to seek opportunities to increase its exposure to international and Australian infrastructure assets.

He said Australian infrastructure assets were attractive due to their strong correlation with Australian economic growth, inflation protection and relatively high levels of earnings certainty.

"These characteristics provide a strong fit with the Fund's mandate to achieve high, risk adjusted returns over the long-term," Neal said.

The exclusive MOU is subject to due diligence and final approval by the Future Fund Board of Guardians, the Australian Infrastructure Fund and Hastings Funds Management - the responsible entities for AIX and AIX securityholders, of which approval will be sought at a meeting at the end of the year.

AIX is being advised by Credit Suisse as financial adviser and Freehills as legal adviser.