Jeff Murphy is an experienced professional with a background in infrastructure development, finance and principal ownership. Since joining Ullico, he has helped manage acquisitions for the company’s infrastructure investment fund.
Ullico Investment Advisors Inc. (UIA) established the Ullico Infrastructure Fund (UIF) to assist in the investment, maintenance and refurbishment of our nation’s infrastructure. The fund has made a number of deals since 2012, including investments in the utility and energy sectors. We asked Managing Director Jeff Murphy to tell us more about Ullico’s infrastructure investments:
In the United States, we have a real problem with aging and sometimes failing infrastructure. We’re at a point where infrastructure needs to be replaced or upgraded, and that requires a lot of investment capital. At the same time, our federal, state and local budgets are under a great deal of strain. On the other hand, pension funds are looking for long-term, stable investments, so the idea is to match that capital with the needs of our communities.
When we set out, a lot of money had been raised to invest in infrastructure through private equity funds. Investors were snapping up community assets in order to flip them to the highest bidder. Our view is that infrastructure assets are public goods, and they’re not meant to be frequently traded. We believe in “buy and hold” not “bought and sold.”
Furthermore, we think a long-dated strategy not only will help our pension clients, it makes us more attractive to asset owners, such as local and state governments. We’re particularly good partners because we’re going to be the same partner they have for the long-term.
The other thing that we care about is that the operations and construction are being done in a responsible way to help secure or further the labor movement. Unions play a critical role in getting infrastructure built or repaired. Infrastructure projects can generate a lot of work hours, and a lot of complex skills are needed on the job. Ullico is unique in the way it brings the investment piece together with that mission.
We think pensions funds should fundamentally invest in infrastructure for a number of reasons. One is that every month, unions have pension obligations to pay, so they need cash flow to satisfy those obligations. When infrastructure investments are structured for a long-term hold, they can create a steady amount of cash flow that matches very nicely with the long-term liabilities that pension funds have. These investments also tend to have less market volatility and can fill the critical role of capital preservation.
A fundamental part of UIF is the inclusion of a strong Responsible Contractor Policy. The policy covers union construction, union operations and sourcing materials for the project. If we operate anything, then the workers are free to organize without interference. Also, whenever there are pre-existing collective bargaining agreements, we will honor them. We will also try to source materials from union shops. So if we were going to buy a turbine, for example, we’d want union-made manufacturers to be part of that.
We’ve had a really good run in the last 12- to 18-months where we’ve been raising investment capital, and we’ve been successfully investing it. We’re on pace to really grow the business. Ullico has made a big commitment to get it going, and it’s starting to pay off.