Infrastructure Funds Increasingly Attractive - Swiss & Global Asset Management

02 September 2010 (PLANSPONSOREurope.com) Infrastructure funds can benefit from growing worldwide demand according to Swiss & Global Asset Management

Industrial nations are improving existing infrastructure and emerging markets are spending billions on building roads, railways and power grids. This global demand and continued investment makes infrastructure an attractive and important long-term theme for investors, according to Swiss & Global Asset Management.

Dirk Kubisch, product specialist, Swiss & Global Asset Management, said: “Infrastructure is one of the key foundations of any economy. Spending has traditionally been made by the respective governments, however, in light of the rising budget deficits and the increasingly empty public purses, more and more infrastructure assets are being privatised. In the OECD countries alone, state assets worth some USD 1 trillion have been sold in recent decades. The most recent example is the sale by the British government of High Speed 1, the rail railway line between London and the Folkestone entrance to the Channel Tunnel. Meanwhile, the Spanish government reportedly plans to sell part of airport operator AENA.”

Infrastructure funds also have the potential to close the gap between dwindling public finances and growing demand. Kubisch continued: “For investors, the primary focus is on the asset class’ attractive characteristics, such as stable long-term cash flows, the potential for growth and the moderate correlation with other asset classes. This combination provides an interesting risk/return profile.”

“The barriers that normally come with investments in this sector, such as high minimum investment and a lack of liquidity, can be overcome through investing in listed infrastructure firms. The recent takeovers in the listed infrastructure sector demonstrate the intrinsic value of infrastructure companies. For example, Intoll Group saw its share price rise sharply in July following a takeover bid from the Investment Board of a Canadian pension fund, offering a 40% premium. There have also been rumours regarding a takeover of Spanish toll road operator Abertis. Two of the company’s shareholders are seeking to stage a buyout together with a private equity firm – also at a clear premium.”

Katherine Blackler
editors@plansponsoreurope.com