Institutional Investing in Infrastructure

May 1, 2016: Vol. 9 Number 5

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From the Current Issue

Infrastructure

Wars and rumors of wars: Emerging markets have a huge need for infrastructure investment and can offer highly favorable returns. Institutional investors can no longer afford to dismiss them as too dangerous.

Wars, nationalizations, civil strife, government defaults — these are only a few of the risks that might spring to mind when one is asked to consider investing in emerging markets.

They are risks that are wholly at odds with the characteristic view of why institutional investors like investing in infrastructure — long-dated, steady returns from an asset operating in  a stable regulatory environment.

Infrastructure

The real estate P3 opportunity in the United States: A market with much potential for infrastructure investors who value social projects

A new type of infrastructure P3 is emerging in the United States —  real estate P3s. These projects and assets are a subsector of social infrastructure, and they are unlike typical real estate projects in two important respects: first, they are government procured, and second, they mix residential, commercial and civic user bases. These P3s also are part of a broader trend in the United States.

Infrastructure

Tough choices: Germany and its competing needs

In March, I visited Berlin for the first time. Usually while traveling to new places, I don’t know what to expect. I wasn’t in Berlin as a tourist and so only spent a few hours walking around.

Today most of the buildings are new — built after so many were demolished in World War II — and decorated with graffiti; there were young hipsters standing outside listening to German rap music. The bridges and roads were rebuilt, too, with high-quality airports, ports, communications and energy infrastructure. In 2006, the World Economic Forum even ranked Germany No. 3 for its infrastructure. 

Infrastructure

First Look: Q1 2016: Size of funds continues to grow

2016 — and it appears the only real straight-line trend is that fewer infrastructure funds are closing in the first quarter year-over-year, but those funds have gotten larger each year since 2014, as well as taking longer to reach a final close.

The amount of capital raised has bounced around, with only $8.6 billion raised by funds closing in the first quarter of 2014. Nearly double that amount — $17.0 billion — was raised by funds closing first quarter 2015, while 2016 shows a small slide to $16.1 billion in the first quarter.

Infrastructure

GIC buys minority stake in U.S. electric transmission company for $1.2b: Fortis Sells 19.9 percent interest

Fortis has agreed to sell a 19.9 percent equity interest in ITC Holdings Corp. to GIC, Singapore’s sovereign wealth fund, for $1.228 billion in cash upon the closing of the acquisition.

In February 2016, Fortis announced the acquisition of ITC for $11.3 billion. With the definitive agreement to sell 19.9 percent of ITC to GIC, Fortis has completed a significant component of the ITC acquisition financing. 

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