Institutional Investing in Infrastructure

August 1, 2019: Vol. 12, Number 7

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From the Current Issue


Smaller, cheaper, safer: New generation of reactors seeks to regain public trust

There is hope that a new breed of safer, less expensive fission reactors will help the nuclear energy sector mount a long overdue comeback in the United States, as well as other parts of the world, where some countries have curtailed or even abandoned their nuclear energy programs. With any luck, sodium-cooled fission reactors and other technologies — including the ability to reuse spent fuel — will get the public to regain their trust in the safety and viability of nuclear generating stations.


Notes from the road: Infrastructure investors are focused on three key themes

Since early May, I’ve had the opportunity to sit down with many of the leading investors, consultants and fund managers in infrastructure. First, at our Spring i3 Roundtable in New York City, then VIP Infrastructure in Toronto and finally last week at the Equilibrium Forum in San Francisco. During my travels and the many discussions, it dawned on me that, as the managing director of IREI’s infrastructure division, I can provide value simply by listening to industry experts, processing the various conversations and summarizing them into a few simple key themes. Aside from concerns spanning all markets, such as trade wars and interest rates, what follows are three key themes I believe are at the forefront of our industry.


The global listed infrastructure report: Essential news and notes

The following report reviews highlights of some of the events and trends affecting global listed infrastructure companies in recent months. The Global Listed Infrastructure Organisation (GLIO) Coverage of core infrastructure companies displays a rolling one-year performance (June to June) at 18.7 percent, with the telecom infrastructure (41 percent), water utilities (25.3 percent) and electric utilities (22.9 percent) sectors leading the way for the same period. Long-term USD annualized total return (15 years) for global listed infrastructure is 11.2 percent, versus 7.6 percent for global equities.


The role and responsibility of institutional investors in delivering sustainable infrastructure

In the course of one week in May 2019, climate change activists disrupted a U.K. pension’s conference and called for local authority schemes to divest from fossil-fuel companies, while the world’s largest sovereign wealth fund, Norway’s GPFG, decided to allocate part of its assets to unlisted renewable energy infrastructure, and a big European institutional investor created a sustainable development director position reporting directly to the managing director.


VIP Infrastructure in Toronto: Investors, consultants and managers ‘peel back the onion’ and ask tough questions about infrastructure investing

IREI’s VIP Infrastructure conference (formerly i3) reached its 12th year in operation in June in Toronto. In VIP Infrastructure’s early days, many institutional investors — particularly in the United States — were new to infrastructure, and much of the discussion and presentations at the conference were generalized, theoretical and not too specific. Investors would describe their interest using terms such as “educational,” “getting their feet wet” and “information gathering,” and while some of those still apply, what was clearly different at the 2019 event was a focus on the specific and the concrete — everyone is on board with ESG principles, for example, but how are actions based on these principles monitored and reported at a construction site or a power plant, and what is their impact on company and asset performance?


A conversation with CalSTRS’ Christopher Ailman on ESG: with Loretta Clodfelter

Climate change has added urgency to investors’ efforts regarding environmental, social and governance (ESG) factors. The $230 billion California State Teachers’ Retirement System (CalSTRS) has been at the forefront of addressing such issues, adopting an investment policy to mitigate ESG risks in 2008. Recently, Christopher Ailman, CIO of CalSTRS, spoke with Loretta Clodfelter, editor of Institutional Real Estate Americas, about the system’s sustainability endeavors. The following is an edited transcript of their conversation.


Global funds dominate infra fundraising: Half of all fund capital raised has been committed to global strategies

Based on YTD 2019 data, more than half the capital raised by private equity infrastructure funds during the past three years was committed to global/multi-regional strategies. (A multi-regional fund is looking at more than one region, e.g., Europe and United States, but is not truly global.) Approximately 22 percent of capital raised by funds closing during that same period were Europe-focused, while another 20 percent of the total capital raised went to North American strategies.


Downshifting: Uber’s bust doesn’t mean ridesharing is going away and transport infrastructure investors need to pay attention

Despite Uber’s recent disappointing IPO, the rideshare market is expected to continue its explosive growth, and that will affect transportation infrastructure in a number of ways, some expected and some yet to be fully understood. According to Global Ridesharing: 40 Billion Rides and Counting, by Sharespost, customer spending on ridesharing globally could grow to $400 billion by 2021, up from between $175 billion to $225 billion this year.


How the internet works: An explanation for a layperson

The internet is something we rely on for a variety of everyday activities, from sending emails, to streaming movies, to finding the locations of our favorite food trucks. In fact, according to the Pew Research Center, while most Americans go online several times a day, a quarter of us are online essentially constantly. While many other technologies are just as saturated into our lives as the internet, such as electricity, few are as invisible as the internet.

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