CalSTRS, the second-largest public pension fund in the U.S., is having difficulty finding suitable infrastructure projects in which to invest some of its $191.2 billion in assets, partly because Congress has been unable to agree on a long-term transportation financing bill.
Countries outside the U.S. are doing better at thinking about infrastructure such as highways and bridges, and the funding there is more stable, said Jack Ehnes, CEO of the California State Teachers' Retirement System, West Sacramento. While U.S. markets deliver the best value for equities, the best infrastructure investments are overseas, he said.
“There hasn't been the best thinking on the government side” in the U.S., Mr. Ehnes said at an event in Washington on Thursday. “We need to realize this is actually a competition.”
Congress has had to pass multiple short-term budget extensions for the U.S. Highway Trust Fund since the last bill expired in 2009 as lawmakers remain gridlocked over how to pay for long-term infrastructure needs. The current short-term patch runs out May 31, leaving Congress rushing once again to craft plans to keep federal construction money flowing to states.
Mr. Ehnes were speaking at a Bipartisan Policy Center event. There are $2 trillion in identified U.S. infrastructure needs, including $1.7 trillion on surface transportation. Only about $1 trillion in funding sources have been identified, according to the center.
CalSTRS began ramping up a new program in 2012 to invest in infrastructure as a way to hedge against inflation and build stable, long-term revenue sources. Mr. Ehnes said CalSTRS has mostly non-U.S. infrastructure investments and that its progress in the U.S. has been slowed by the way financing deals are structured, the various levels of government bureaucracy and the budget discord in Congress.
His staff evaluated 136 infrastructure projects last year and narrowed those down to 17 that seemed to have merit. CalSTRS only invested in two, he said.
There's demonstrated need for infrastructure investment, and there's desire among the big institutional investors, but “there's something wrong,” Mr. Ehnes said.
Senate Finance Committee Chairman Orrin Hatch, a Utah Republican, said May 5 it was likely Congress would extend transportation programs until the end of the year, rather than agreeing to a long-term deal. House Ways and Means Committee Chairman Paul Ryan, a Wisconsin Republican, backs a similar approach.
