Institutional Investing in Infrastructure

December 1, 2015: Vol. 8, Number 11

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Infrastructure

And the world is made of energy: infrastructure capital drawn to energy, power, renewables

According to the U.S. Energy Information Association, world energy consumption is expected to grow by 56 percent between 2010 and 2040, from 524 quadrillion British thermal units (Btu) to 820 quadrillion Btu. Most of this growth will come from non–Organization for Economic Cooperation and Development (non-OECD) countries, where demand will be driven by strong economic growth, changing demographics and urbanization.

Infrastructure

Green with envy: Infrastructure investors target greenfield strategies as prices in core brownfield markets get exorbitant

Conventional wisdom often gets it wrong — we know this — but despite that fact, institutional investors still take a certain degree of comfort in running with the herd. This is in part because if you are wrong on an investment decision, it is better to be wrong along with a number of your board than to be the only one who climbed out on a limb — then you are left to explain to your peers why you are the only one of them to have made that investment. 

Infrastructure

The glamorous life

I always imagined what life would be like on the road. How glamorous it would be to run through the airport in four-inch heels, hair blowing as I ran from terminal to terminal. I imagined whom I would sit next to on the airplane and the fascinating conversations we would have as I traveled coast to coast. 

Infrastructure

California dreaming: the Golden State will have to dig deep to tap new ways to deliver water to its more than 30 million people and private investors will have a role

California is in its fourth year of a record-breaking drought that is wreaking havoc on California residents and impacting the rest of the country. With no end in sight, in January Governor Brown declared a State of Emergency and imposed strict water conservation measures on residents, businesses, municipalities and farms, with a mandate to cities and towns to reduce their water usage by 25 percent.

Infrastructure

The case for airports: private airport investment took off in Europe in 1987 and has traveled from there

Airports are unusual investment vehicles. They are highly regulated property assets with characteristics of utilities, shopping malls and monopolies, at least in a local context. They operate in a relatively high-growth arena, with global air passenger demand forecast to grow at 5 percent a year for the foreseeable future, and with the number of passengers increasing by just less than twice the rate of the growth in real GDP. 

Infrastructure

Taking it to the streets: Infrastructure holds considerable appeal for private investors focused on yield and other objectives

Given the strategic importance of infrastructure and its impact on quality of life — as well as its high capital cost — the provision of infrastructure has traditionally been a government responsibility. However, the budget constraints confronting many national and local governments today suggest that the financing of infrastructure will increasingly move toward private investment and public-private partnerships, offering increasing opportunities for private investors. As such, infrastructure is gaining broad recognition among investors as a distinctive asset class.

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