Research - APRIL 21, 2017

A growing trend as stakeholders look to unlock the potential of the infrastructure asset class

by Drew Campbell

A bottleneck exists between the capital available to finance and fund infrastructure investments and the actual assets available for this financing. In other words, there is a lot of capital chasing relatively few opportunities. According to Bundling: A Growing Trend As Stakeholders Look To Unlock The Potential Of The Infrastructure Asset Class, “scale is an important factor in achieving cost efficient financing of construction and/or operations because infrastructure is so capital intensive by nature.”

Intuitional investors also want to make capital commitments at scale — $25 million, $100 million, $500 million — to achieve efficiencies, including keeping costs down and more quickly reaching target allocations. The report suggests more bundling of assets and projects — this already happens — could be the way to get more capital into infrastructure investment. In the United States, water assets and renewable energy projects are comparatively too small scale for many institutional investors, but if these are bundled appropriately, they could attract large capital commitments from this source.  “We are seeing a rise in bundling structures with increasing interest in infrastructure assets,” notes S&P. “Furthermore, as different participants get involved and their needs change, we expect to see an evolution in approaches to bundling structures.”

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