The Achaean Difference
Our value proposition leverages an innovative public-private partnership (P3) structure, utilizing Achaean Infrastructure’s patented annuity, designed for use with insurance Separate Accounts – a well-established, proven life company investment vehicle.
Sponsoring Entity Benefits
An Ideal Funding Source
Achaean presents a new funding source for infrastructure investment and pension liabilities that obviates the need for tax increases and avoids borrowing capacity constraints, negative rating implications, and interest service costs of municipal debt. Further, the sponsoring entity does not forfeit ultimate ownership of the infrastructure asset.
Whenever feasible, should the governmental body or agency have an operational organization in place, it will continue to direct the toll/fee collection and maintenance of the asset, thus
- Leveraging pre-existing competencies
- Retaining and/or creating employment
- Ensuring aligned guardianship of the asset
Infrastructure Investor Benefits
Advantages beyond limited partnerships, private equity funds and direct investment include:
- Use of the Separate Account as a vehicle for real estate and infrastructure investment pre-dates partnership and REIT structures and was used eﬀectively by life companies for their own investments since the 1970s.
- Insurance Separate Accounts don’t rely on continuing regulatory beneficence as do in-vogue trust and oﬀ-shore vehicles, lowering legal and tax risk for long-duration investments.
- The life company assumes general fiduciary responsibilities, advisory oversight, and supervision, assuring compliance with pension fund Standard-of-Care provisions and reducing the burden of project investment administration.
- In contrast to other infrastructure investment vehicles, the Separate Account eliminates the potential for conflict-of-interest issues as the life company legally owns and controls the assets of the Separate Account.
- The life company is not at risk of being considered a plan sponsor.
- Unlike traditional private equity partnership or fund structures, which must create a taxable entity, the Separate Account is legally a part of the life company for tax purposes. There is no separate tax reporting on behalf of the Separate Account.
- The Separate Account insulates corporate pension funds from any UBIT exposure; and with IRS periodic consideration of expanding UBIT regulations to public plan sponsors (e.g., in the negotiations for the Tax Cut and Jobs Act of 2017), the Separate Account becomes a safeguard against any future regulatory shift.
- A plan can establish a dedicated Separate Account or participate in a comingled Separate Account – or both.
- A Separate Account can incorporate a single project, multiple projects or even ongoing investments in multiple projects over time, providing a simple method for diversification.
- Where a defined benefit plan permits the participant to take a lump sum at retirement, those plans could create a group annuity incorporating infrastructure or traditional capital market assets, using Achaean’s other patented immediate income products to create “Personal Pensions.”
- Separate Account transaction and asset management fees are less than those traditionally associated with private equity and partnership structures.
- Reduced administration expense (see Governance).
- Reduced tax expense (see Tax Efficiency).
- Reduced formation expense because a single Separate Account structure can accommodate multiple infrastructure investment opportunities (see Flexibility).
- A Separate Account is insulated from the liability of the life company -assets of the Separate Account are protected from the general creditors of the life company.
- Participants in a Separate Account are only exposed to the extent of their proportionate share of the Separate Account risks.
Government infrastructure can be funded, designed, built, operated, and maintained in a lease agreement. User fees fund the infrastructure asset, which is returned to the sponsoring public stakeholder when the lease ends.
The targeted investments will be in projects with recurring income, such as tolls or usage fees, that governmental sponsors cannot finance. It is Achaean’s intent to lease ownership of these assets for a contracted number of years, after which they revert back to the governmental sponsor on terms to-be-determined, based on the facts and circumstances of the specific project.
Jointly, Achaean and the governmental sponsor will set tolls/fees to cover costs and meet required investor return provisions. By formula, there will be a minimum investment return schedule with any excess earnings to be shared between the government sponsor, the investors, and Achaean. Where the government sponsor has an operational organization in place, it is Achaean’s intent to leverage that expertise by employing that entity to continue to direct the toll/fee collection and maintenance of the asset.