Federation Asset Management soars in challenging market

By Newsdesk

December 05 2023
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Amidst the tumultuous public equity terrain of the past year, Federation Asset Management has emerged resilient and triumphant, closing 2023 with robust returns and an optimistic outlook for the private equity sector as 2024 approaches.

Federation Asset Management soars in challenging market

Cameron Brownjohn, the CEO of Federation, shared insights into the company's steadfast performance. "Through to end of October 2023, Federation team members maintained our track record of delivering strong returns (+15.7% net) as we added assets across the portfolio, with a focus in the childcare and sustainable energy infrastructure sectors," he remarked, exemplifying the firm's dedication to growth and profitable sectors.

Despite the challenging macroeconomic conditions, Federation foresees greater relevance for private equity in the upcoming year, particularly for navigating sluggish operating environments. "By sticking to our approach of identifying high quality companies in our key focus areas, and investing for the long term, we have been able to deliver superior returns," Brownjohn added, hinting at a strategic resilience that sets the firm apart.

The trajectory for private equity in Australia has been positive, outstripping traditional stock market returns, a pattern that Federation confidently expects to continue. This confidence is backed by Federation's expansion of its childcare portfolio, aiming to build a A$1 billion portfolio by 2025. Brownjohn shares that "Our childcare assets are mostly newly built and bespoke centres with long-term leases that have CPI-indexed cashflows and minimal capex requirements. These are very attractive investments for our investors."

Federation's environmental and social governance (ESG) commitments haven't been left by the wayside either—Brownjohn highlights the dual benefit of their investments in childcare, including both reduced carbon footprints through solar installations and bolstering female workforce participation.

Along with successes in the childcare sector, Federation has also made strategic exits in healthcare, with a lucrative investment in George Clinical bought out by Hillhouse Capital Group. Brownjohn proudly stated, "We are pleased to have sold George Clinical to Hillhouse Capital for a sizeable increase on our original investment," demonstrating the company’s knack for fruitful ventures.

On the sustainable infrastructure front, Federation celebrated the full operational status of the Riverina battery energy storage system, a project expected to have a significant impact on local energy consumers. "Riverina Bess is now importing and exporting electricity at its full nameplate capacity and benefiting New South Wales energy consumers. It is New South Wales’s largest and most advanced battery and is expected to power 240,000 homes with electricity during peak time," explained Brownjohn.

Amid navigating a year complicated by heightened interest rates, Federation, preferring low leverage in its portfolio companies, weathered heightened financial costs. Yet, as the year waned, the industry saw a resurgence in deal-making, with EY reports of increasing multi-million-dollar deals and a promising forecast for heightened activity.

As 2023 wrapped up with deal flow surging, Federation readies itself for an active 2024, with an unwavering commitment to its principled approach to investments. “Deal flow through the back half of 2023 has been very strong and we expect this to continue into 2024. We will also continue to focus on our ‘profit with principle’ approach which requires us to make investment decisions from a cautious, long-term viewpoint and an eye on the future," Brownjohn concluded, offering a glimpse at the strategic lens through which Federation views its future

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