Infrastructure is the quintessential real asset – you can see it, you can kick it, you know it will be useful tomorrow.
But there is still a reluctance to include it in pension fund portfolios. Why is this? There are a number of reasons:
- The pricing power that comes with a monopoly position might easily be offset by over-zealous regulation.
- Infrastructure projects are big – and require big investments.
- Infrastructure investments are often unlisted – which spawns fears that the illiquidity bogey man will bite.
But these reasons pale by comparison with the arguments in favour of the asset class:
- Predictable, inflation-linked cash flows are a pension trustee’s dream.
- Regulation can reduce the risk of default.
- The illiquidity premium is tailor-made for long term investors.
And The Donald wants to spend big on infrastructure in the US. While Mother Teresa needs to spend big on the UK. The lurch from monetary easing to fiscal enlightenment is upon us.
This could be a once in a generation opportunity to invest in secure, income generating assets. Hence the inundation of offerings coming through our doors; more often than not, with solutions to the objections that a pension trustee might typically raise.
Our view: in a low yielding, unpredictable world – it would be a dereliction of duty not to consider infrastructure; and private markets generally.
A Partners Group fund that invests in private equity, debt, real estate and infrastructure has served our clients well for a long while. More bespoke offerings from other well know names such as Macquarie and WTW are making our noses twitch.