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Financial Institutions

Investment Opportunities: Infrastructure Emerges As Its Own Asset Class

2016-05-31 16:16

FOREWORD

INFRASTRUCTURE IS EMERGING AS A STRONG ASSET CLASS IN ITS OWN RIGHT, SEPARATE TO REAL ESTATE OR PRIVATE EQUITY ALLOCATIONS. IT IS BUILDING THE PORTFOLIOS OF INVESTORS AS WELL AS FUND MANAGERS OF PENSION AND SOVEREIGN WEALTH FUNDS.

Infrastructure as an asset class is well suited to public pension funds and sovereign wealth funds (SWFs), many of which blend investment choices with government initiatives around development. These investors:

  • Have an ability to deploy large volumes of capital at a time.
  • Have no long-term liabilities or unexpected redemptions to manage
  • Can afford to be more patient, because they are unencumbered by regulatory restrictions on investment choices.

Australia and other developed countries have become a destination for funds such as these, especially where major government infrastructure projects are underway.

KEY TAKEAWAYS

  • Opportunities for the infrastructure asset class is great, but investors and fund managers must:

    • Remain mindful of uncertainty regarding the timing and the scale of the impending financing task.
    • Have a sufficiently broad and flexible investment mandate.
    • Possess an ability to self-manage liquidity over a long-term investment horizon.
  • In the last decade the investor base in Australia has diversified to include investors from funds in the Middle East and Asia. This is partly due to privatization of state-owned infrastructure, a rise of major resource projects during that time, and strong infrastructure demand from both domestic and foreign investors.
  • In Australia, 40% and 57% of deals in 2014 and 2015YTD respectively were completed for AUD1b or more. Comparatively, the proportion of deals occurring for AUD1b or more in the proceeding four years was an average of 20%.
Paul Orton
Global Head of Project & Export Finance
Global Loans & Advisory, ANZ
 
Rennie Siow
Head of Funds & Insurance, Singapore
Financial Institutions Group, ANZ
 
 
 
 

For a full set of relevant disclosures, please visit the link below.

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Investment Opportunities: Infrastructure Emerges As Its Own Asset Class
2016-05-31
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This publication is published by Australia and New Zealand Banking Group Limited ABN 11 005 357 522 (“ANZBGL”) in Australia. This publication is intended as thought-leadership material. It is not published with the intention of providing any direct or indirect recommendations relating to any financial product, asset class or trading strategy. The information in this publication is not intended to influence any person to make a decision in relation to a financial product or class of financial products. It is general in nature and does not take account of the circumstances of any individual or class of individuals. Nothing in this publication constitutes a recommendation, solicitation or offer by ANZBGL or its branches or subsidiaries (collectively “ANZ”) to you to acquire a product or service, or an offer by ANZ to provide you with other products or services. All information contained in this publication is based on information available at the time of publication. While this publication has been prepared in good faith, no representation, warranty, assurance or undertaking is or will be made, and no responsibility or liability is or will be accepted by ANZ in relation to the accuracy or completeness of this publication or the use of information contained in this publication. ANZ does not provide any financial, investment, legal or taxation advice in connection with this publication.

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