Pension funds and other asset owners increasingly are investing in U.S. infrastructure, often buying the assets from infrastructure money managers.
This could be a win-win. Investor interest comes at a time when the first crop of infrastructure funds raised in the U.S. in 2004 and 2005 are coming to the end of their 10-year life span. Managers are expected to bring more transactions to market to take advantage of growing interest by direct investors.
Industry insiders expect more infrastructure core projects to change to institutional investor ownership. Investors prize the core projects, even though returns generally are lower than investments in new projects, because of the yield that core infrastructure could generate.
Several deals have been made in this year alone:
- the C$287.3 billion ($218.6 billion) Canada Pension Plan, C$154.4 billion Ontario Teachers' Pension Plan and the C$77 billion Ontario Municipal Employees' Retirement System closed a deal to buy the company that operates the Chicago Skyway toll road from Cintra Infraestructuras, a subsidiary of Ferrovial SA, and Australia-based infrastructure manager Macquarie Group Ltd.;
- the $304.3 billion California Public Employees' Retirement System, Sacramento, and insurance company Allstate Corp. took stakes in the company that operates the Indiana Toll Road. The company, which was bought by IFM after it went bankrupt in 2015, had been owned by Macquarie Group and Ferrovial;
- CalPERS bought a stake from Sumitomo Corp. of Americas in the operator of two solar photovoltaic power generation facilities near Palm Springs, Calif.;
- CalPERS also is among the finalists bidding on Virginia's Pocahontas Parkway, which Macquarie put up for sale this year, sources said. Canada Pension Plan already owns a stake in the toll road; and
- Dutch firm PGGM and John Hancock Financial in July bought a 30% stake in DQE Holdings LLC, the Pittsburgh-based parent of utility Duquesne Light Co. and wholesale power marketer Duquesne Power LLC, from Macquarie Infrastructure Partners. PGGM is the e200 billion ($219 billion) firm that manages the assets of the e184 billion Pensioenfonds Zorg en Welzijn, Zeist, Netherlands.