How to implement an effective infrastructure debt strategy
Infrastructure debt as an investable asset class? Surely this is for the sophisticated investor only? Well maybe not, PensionDanmark are buying up debt, Allianz having just poached a crack infrastructure debt team and AMP and Hadrians Wall have just closed their first infra debt fund.
Ok these guys are still pretty sophisticated, but could infrastructure debt be for you? Would your board of trustees be interested in low risk, steady, if modest, returns? If so then you may be asking yourselves some of the following questions:
· How do I fit infrastructure debt funds into my portfolio – fixed income, infrastructure or a new bucket?
· Should debt investors focus on buying bank loans or buying bonds?
· How should investors allocate between junior and senior infrastructure debt?
· Do I need to expand my existing team’s expertise, outsource or create a new bucket and hire a new team?
· What are the benefits of hiring an intermediary?
· How does the wider implications of solvency II impact infrastructure debt?
Do you agree are these the important questions that you’re all asking yourselves?
Hadrian’s Wall be putting together a report for us answering the above questions in the next couple of weeks, we’ll keep you posted!
at 8:31 am
Congratulations: This list is a very accurate list of many of the relevant topics.
However, it seems that, given the integral yield characteristics, of infrastructure debt, this new asset class will gain institutional investor interest faster than one might expect.
I would suggest to add a note where deals will be sourced from now and in the medium term.
at 3:56 pm
Thanks Severin, I hope this goes some way to satisfying your suggestion Hans-Peter. Perhaps you’d liek to repsond in kind f you have anything to add?
I might reblog this Severin so the rest of the community can see it more readily. Happy to do the same for DC if you are able to shed any further light on the discussion Hans-Peter (just drop me an email: jonathan.whelan@terrapinn.com)
at 3:49 pm
There is no shortage of infrastructure transactions that need debt finance.
- Governments can no longer afford to fund infrastructure development.
- Utilities are spinning off non-core assets, which tend to be infrastructure and require financing.
- PPP pipelines are strong in a number of core European countries and need long-term finance.
Ever fewer European banks are willing to lend money long term and infrastructure assets need long-term finance given the large up-front costs of these assets.
Capital markets investors are increasingly taking notice of this opportunity to invest in debt instruments that offer long duration at higher yield levels than government debt can offer.
Using European capital markets to fund European infrastructure is thus a natural progression of a trend that is well established in other markets.
at 3:57 pm
Thanks Severin, will reblog this so the rest of the community can have a look at your answer, let me know when you have that report ready!
at 3:36 pm
Nice grouping of very relevant questions. Was there ever a follow up post or report to this? Thanks John!