“We did see some international investors delay their commitments in the aftermath of the referendum, but everyone reaffirmed their UK portion,” says Andrew Robertson, co-head of infrastructure debt investment solutions at Macquarie Group. “The case for the domestic investor to invest is also strong because of the long-dated inflation-linked characteristics these assets generate that match pension funds liabilities.”
Robertson points to a White Paper recently published by the bank – Appraisal of private debt opportunities: A holistic approach for UK pension funds – which shows for every £1bn UK pension funds allocated from corporate bonds to infrastructure debt, a reduction in deficits of roughly £270m could be achieved.
“These results are favourable compared with investing in comparable opportunities in commercial real estate or direct corporate lending,” he adds.
RIGHT DIRECTION
John Dewey, head of investment strategy, global investment solutions at Aviva Investors, also sees a strong appetite.
“The UK has benefited from one of the most stable infrastructure regimes and I do not expect to see any real change in that,” he says. “This is not to say there won’t be policy challenges or mishaps along the way, but the government wants to facilitate greater investment and we could also see further incentives and stimulus for the asset class in the Autumn Statement.”
While Dewey is not expecting overseas investors to significantly pull back, if they do, he believes that domestic investors would step in such as large insurance companies, pension funds and local government authorities.
To date, plans are still going ahead to pool the assets of the 89 English and Welsh local government pension funds into six new British Wealth Funds as parts of the last government’s efforts to overhaul infrastructure financing.
Ed Clarke, co-founder of Infracapital, the equity infrastructure arm of M&G Investments, also points to the government finally unlocking some of the bigger projects such as Hinkley Point C and the HS2 rail link as well as putting Heathrow and Gatwick expansions on the agenda for discussions as a sign of its commitment. Like many of his colleagues though, he believes the most attractive opportunities as well as interest are in the smaller to medium-sized projects, both brown and greenfield.
