November 13, 2014

By Shahnaz Mahmud

In July, the White House Rural Council held its first Rural Opportunity Investment Conference as a means to explore potential investment opportunities that exist throughout rural America. At the conference, US Department of Agriculture Secretary, Tom Vilsack, announced the creation of a $10 billion investment fund, the Rural Infrastructure Opportunity Fund, designed to assist in rural economic development. The intention of this fund is to have a long-term impact on rural communities across the U.S.

The White House Rural Council was launched in 2011. The conference and fund are a part of the Obama Administration’s efforts to uncover and participate in investments across rural America.

“The concept of the Rural Infrastructure Opportunity Fund was spurred by the vision and leadership of Secretary Vilsack,” says Leo Tilman, Executive Chairman of Capitol Peak Asset Management, which manages the fund. “It stemmed from a long-held view that addressing the scale and scope of infrastructure challenges in the United States – and particularly in rural America – requires the attraction of new capital.” By “new capital’” Tilman is referring to concerted investment by pensions, endowments, sovereign wealth funds, and other significant institutional investors in critical infrastructure projects which include water, energy, broadband as well as community facilities such as schools and hospitals.

A Collaborative Effort

The founders of Capitol Peak, who have been longstanding trusted advisors to both the government and the private sector, designed the fund and the underlying public/private partnership in close collaboration with the USDA and CoBank. Tilman notes that the latest advances and thought leadership in risk intelligence, strategy, business models, and investing were used to design a sustainable business model for the public-private partnership, where the government and the private sector can collaborate and co-lend with each other to affect change on a significant scale. One important feature of the design was to place a leading cooperative bank with extensive experience in infrastructure lending at the center of the public/private partnership. As anchor investor, CoBank has committed $10 billion of balance sheet capacity to lend alongside the Rural Infrastructure Opportunity Fund investments, subject to CoBank lending authorities and underwriting requirements, says Tilman.

Fund participants will include pensions, endowments, foundations, and sovereign wealth funds who will complement the current participants in these markets: US government, government sponsored enterprises, commercial banks, and some insurance companies.

By attracting new capital to critical infrastructure projects and being able to create funding solutions that span the entire capital structure, the fund seeks to contribute to the real economy: create jobs and help rural communities thrive, says Tilman. This pertains to schools, hospitals and other community facilities, as well as broadband connectivity, he adds.

Greater Implications for the Fund

Capitol Peak Asset Management is working closely with its public and private partners on identifying viable projects suitable for the fund, such as agricultural investments, water facilities, biofuel plans, broadband and clean energy programs – that span “the entire gamut of critical infrastructure,” Tilman says. “We are focusing on important projects that will make a difference to specific communities. Moreover, we hope to demonstrate how the government and the private sector can work together in an atmosphere of trust.”

Tilman highlights the greater implications for the fund – investing to generate greater societal impact. “The need to enhance the critical infrastructure in this country and create jobs is profound,” he says. “It’s very exciting to think that powerful financial solutions can be directed at improving people’s lives through infrastructure, economic development, clean energy, and broadband connectivity.”

“We wanted to design a public/private partnership that can work over the long-term and can be a win-win for all stakeholders,” he says. “As a result, institutional investors can get access to new investment opportunities that have an important social purpose. When business is done fairly and transparently – and by utilizing the best ideas and tools available – amazing things can happen.”