The Collaborative Model of Long-Term InvestmentRAJIV SHARMA

GLOBAL PROJECTS CENTER STANFORD UNIVERSITY

1 © Rajiv Sharma, Stanford University

Background/Context

The Three models of Institutional Investment:

1.Norwegian Model – in-source, traditional public markets

2.Endowment Model – out-source, alternative assets

3.Canadian Model – in-source, alternative assets

2© Rajiv Sharma, Stanford University

Background/Context

What we seem to be observing in the market place is a 4th model of institutional investment – The ‘Collaborative’ Model

The ‘Collaborative’ Model = co-operative investment partnerships/platforms for long-term assets

(co-investment platforms, seeding managers, platform companies, collaboration initiatives with peers, infrastructure, real estate developments, clean energy,

private equity, agriculture, timber)

Our research has been looking at theoretically validating the collaborative model of investing that is taking place.

3© Rajiv Sharma, Stanford University

The Institutional Investment Value Chain

4

Investment Opportunities

‘LOW COST’ Institutional

Investors

AssetManagers

Opportunity Sponsors:

Companies,Government

Etc.

Sell Side

Banks

Buy Side

Banks

Fund of Funds,

Placement Agents,

Consultant

FEES!

FEES! FEES!FEES!

‘LOW COST’ Institutional

Investors

© Rajiv Sharma, Stanford University

Collaborative/Partnerships Model of Institutional Investment (Investor-Led Efficient Private Market Vehicles)

Co-Investment Platforms (Peer Collaborative Investment Vehicle)

Platform Companies (Seeding Management/Development Team)

Joint Ventures (Non-exclusive partnership with manager/

developer)

GSIA (Canada) IFM (Australia)

CPPIB Syndicate (Canada) IST3 Global Infrastruktur (Switzerland)

CKD Infraestructura México, S.A. de C.V. (Mexico)

TIAA-CREF (USA) PIP (UK)

PINAI (Philippines)

CPPIB/SP (India) PSP/Reliance (India)

Cubico (London)

Case Studies

© Rajiv Sharma, Stanford University

TIAA-CREF Global Agriculture LLC

BCIMC CDPQ AP2

Westchester Group

Global Agriculture Assets

Investment Committee Ownership Shares TIAA-CREF - 80%

Westchester Management – 20%

Investor Capital

Investments

TIAA-CREF Global Agriculture LLC Platform

© Rajiv Sharma, Stanford University

Cubico Sustainable Infrastructure

Santander OTPP PSP

19 wind, solar and water infrastructure assets globally

London HQ

Milan Sao Paulo Mexico DF

Cubico Sustainable Infrastructure Platform

© Rajiv Sharma, Stanford University

Other Case Studies looked at:

- IFM (Australia)- Pension Infrastructure Platform (UK)- Global Strategic Investment Alliance (OMERS, Canada)- CPPIB 407 Toll Road Syndicate Model (Toronto, Canada)- Philippine Investment Alliance for Infrastructure Fund (APG, GSIS, ADB,

MIRA)- TIAA-CREF Agriculture Platform- Cubico Sustainable Infrastructure (Santander, PSP, OTPP)- CPPIB Shapoorji Pallonji JV (India)- CDC Co-Investment Partnerships (France)

1. Reframing Finance 2. Organic Finance

© Rajiv Sharma, Stanford University

Case Studies

9

Key Lessons:

- Specific expertise and sophistication is still required for setting up the collaborative model

- Governance needs to be clearly structured at outset- Collaboration required within organisation- Diversity in investor base (deal flow, regulatory issues)- Trust is a pre-requisite before formally coming together – illustrating the

importance of relationship/network building

1. Reframing Finance 2. Organic Finance

© Rajiv Sharma, Stanford University

Implications

10

Investors:Provides the theoretical validation for collaboration, networking and re-

intermediatingProvides a framework for investors to execute a collaboration strategyProposes a new role: “Head of Social Capital”Provides guidance and lessons learned from collaborative model case studies

Intermediaries:Provides a framework for aligned governance between investors and managersIllustrates the types of new intermediaries that need to be formed e.g. WCX, AI,

capital accumulators, deal originators

Governments:Highlights the role that governments need to play - to appreciate the value of long-

term investorse.g. Queensland, Quebec, Netherlands, India

1. Reframing Finance 2. Organic Finance

© Rajiv Sharma, Stanford University