Institutional Investing in Infrastructure

November 1, 2019: Vol. 12, Number 10

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From the Current Issue


Who is swimming naked? “You only find out who is swimming naked when the tide goes out.” — Warren Buffett

Many central bankers, economists and pundits are beginning to warn of an imminent global recession. Personally, despite all the issues piling up, I take that with a huge grain of salt considering only a handful of contrarians actually predicted the global financial crisis, while “experts” such as Mad Money host Jim Cramer still have jobs after shouting, “Bear Stearns will be fine!” days before it shuttered its overleveraged doors.


Closing time: Several funds close after 18 months or more on the road

According to IREI’s FundTracker database, infrastructure investment managers closed eight funds in third quarter 2019, raising more than $8.1 billion, based on preliminary data. In third quarter 2018, 16 funds held final closings, raising nearly $40 billion. In second quarter 2019, nine funds were closed, raising nearly $16.3 billion.


Investors covet cash-flow-yielding investments

Investment markets aren’t what they used to be. In a RiskFirst survey reported on by Pensions & Investments, the vast majority of U.S. pension funds indicated to the National Association of State Retirement Administrators they have abandoned hopes of 8.00 percent return targets and have scaled back those expectations to 7.25 percent.


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 Organization (GLIO) Coverage of core infrastructure companies displays a rolling one-year performance (September to September) of 18.2 percent, with the telecom infrastructure (44 percent) and electric utilities (28 percent) sectors leading the way during the same period. Long-term U.S.-dollar annualized total return (15 years) for global listed infrastructure is 10.8 percent, versus 7.8 percent for global equities.


Private markets go public: Infrastructure capital markets activity tilting back to privatization

Capital markets activity within the infrastructure sector, including mergers, acquisitions and privatizations of listed companies, has accelerated in the past three years as the competing incentives for public-market listings tilt in favor of privatization as the cycle matures. The privatization drivers are familiar — global investors migrating from fixed income in the search for yield and for long-term capital to match liabilities — but the strategies are complicated by the sheer scale of the sector’s listed companies.


Global listed infrastructure: An idea — and an allocation — whose time has come

Global listed infrastructure — call it an asset class, a sector or simply a disparate collection of relatively stable cash-flowing assets — provides the potential to not only complement unlisted infrastructure, but also provide positive upside/downside capture spread relative to most listed options, positive correlation to inflation, higher cash-flow stability than the broader market, and lower volatility than most equities.


Sun and wind at its back: Clean energy investment during decade reaches the trillions

Investment in new renewable energy is on track to hit $2.6 trillion this decade (2010–2019), according to a study by BloombergNEF, conducted on behalf of the United Nations Environment Program and Frankfurt School’s UNEP Center. The investment boom has been driven in part by the falling costs of wind and solar power plants, which have now become affordable new markets, and at prices rivaling fossil fuels.


The evolution of infrastructure investment

starting to catch up with its real estate and private equity brethren. As the asset class continues to evolve, infrastructure strategies have developed from core to value-add, with “super-core” and opportunistic strategies recently emerging.


Challenges in measuring sustainability for infrastructure investors

Today’s infrastructure investors have a menu of screening tools and accounting metrics at their disposal to measure and report on the sustainability of their portfolios. In the previous article, we argued sustainability metrics for infrastructure investors are even more important than similar metrics in other asset classes. This is partially because of the scale of their potential impacts, but also because investor metrics in infrastructure are unique in that they improve upon metrics already used in regulation and permitting.


Investing on the digital frontier: Strong growth is expected in the data center market, and infrastructure investors are taking note

It is tempting to think of data centers as simply another category of real estate — not unlike office, retail or industrial. Each property type offers space, which is measured and leased in square feet or square meters. The development and construction process for the different real estate types also is similar, from land acquisition and permitting to the process of finding tenants and operating the property.

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