Investors answer call over infrastructure
Skip to main content
pilogo-NEW
Subscribe
  • Subscribe
  • My Account
  • login
  • NEWS
    • Asset owners and the coronavirus
    • Alternatives
    • Consultants
    • Coronavirus
    • Defined Contribution
    • ESG
    • Frontlines
    • Hedge Funds
    • Investing / Portfolio Strategies
    • Money Management
    • Pension Funds
    • People Moves
    • Private Equity
    • Real Estate
    • Searches & Hires News
    • SECURE Act
    • Special Reports
    • WorldPensionSummit
    • Ron Schmitz
      Pandemic drives faster transition for Virginia to private markets
      Mubadala Investment Co. logo
      Mubadala draws on portfolio in coronavirus fight
      T.J. Carlson
      Texas Muni reduces downside risk during pandemic, finding opportunities now
      Scott Davis
      ‘Triage plan’ at Indiana system helped stem losses
    • BentallGreenOak agrees to acquire Metropolitan Real Estate Equity
      watch video
      0:45
      Private funds weathered 2020 turmoil
      Daniel McHugh
      Aviva Investors promotes from within for real assets CIO
      Marc Rowan
      More alts managers seek expansion to retail market
    • Kieran Mistry
      Hymans Robertson picks head for new non-traditional risk transfer unit
      Troy Saharic
      NEPC brings on director of new business development
      Bill Foley
      Foley-backed SPAC agrees to $7.3 billion deal with Alight
      Jason Schwarz, chief operating officer of Wilshire,
      New owners have big plans for future of Wilshire
    • Multiemployer pension measures cleared for relief bill vote
      The Charging Bull statue is covered in snow near the New York Stock Exchange on Feb. 11, 2021
      Bain: Private equity managers finish 2020 strong
      Eastern Colorado VA Receives Shipments Of Covid-19 Vaccines
      Fidelity looks to speed vaccinations to get workers back to offices
      OMERS CEO Blake Hutcheson
      OMERS records worst loss since 2008 on bad COVID-19 bets
    • DCALTA releases daily valuation tool for alts in DC plans
      PSCA: Employee participation in non-qualified deferred comp plans rising
      Profile of backlit woman against at TV monitor with female symbols on it
      Women outperform men in managing DC plans – Morningstar
      A  Malaysia flag flies in Putrajaya on Sept. 23, 2020
      Malaysia’s EPF ends 2020 up 7.9% at almost $250 billion
    • TPT Retirement taps into low-carbon strategies
      Gary Gensler
      Nominee Gensler backs SEC climate risk disclosure
      Emissions from a smokestack in Poland
      Asset managers facing more scrutiny on ESG issues – report
      Boris Johnson, U.K. prime minister, hosts the U.N. Security Council's virtual meeting on climate change risks in London on Feb. 23, 2021
      Progress in fighting climate change falls short – U.N.
    • Donation illustration
      Jefferies will use trading commissions to do good
      Michael Arougheti
      SPACs ride wave as latest investment darling
      Spirit winners
      Prudential honors young people who are helping out
      2 U.K. pension execs take on ESG investing in new podcast
    • Robert 'Rob' Shafir listens during a Senate Permanent Subcommittee on Investigations hearing in Washington on Feb. 26, 2014
      Sculptor hedge fund hits sixth straight year of outflows
      The WallStreetBets forum on the Reddit Inc. website on a laptop computer and the GameStop logo on a smartphone in an arranged photo.
      GameStop frenzy has hedge fund managers rethinking next moves
      Gabe Plotkin, chief investment officer and portfolio manager of Melvin Capital Management, speaks during the Sohn Investment Conference in New York on May 6, 2019
      Citadel, Point72 back Melvin with $2.75 billion after losses
      Shanghai skyline
      Global hedge funds struggle even in a more open China market
    • University of West Florida Foundation assigns $5 million to private credit
      Pontiac General Employees drives $5 million into real estate
      TPT Retirement taps into low-carbon strategies
      Gary Gensler
      Nominee Gensler backs SEC climate risk disclosure
    • Fidelity registers 17.9% rise in AUA in 2020
      Mellody Hobson
      Ariel’s Mellody Hobson hitting her stride as co-CEO
      Adrian Lee & Partners appoints head of sales and marketing
      Jackson Square Partners out as Vanguard subviser
    • Funded status of largest U.S. pension plans climbs in 2020
      Corporate plan funding ratios get a boost in February – 2 reports
      Silentnight owners settle pension fund dispute with regulator
      A  copy of the Daily Mirror newspaper is removed from the production line at Trinity Mirror's factory in Watford, U.K., on April 13, 2010
      Media group Reach inks buy-in deal for pension fund
    • Adrian Lee & Partners appoints head of sales and marketing
      BlackRock Investment Institute picks global chief investment strategist
      Metlife Investment Management selects new head of real estate equity
      Eric Lane departs Goldman for Tiger Global
    • The Charging Bull statue is covered in snow near the New York Stock Exchange on Feb. 11, 2021
      Bain: Private equity managers finish 2020 strong
      Carlyle secures $4.1 billion ESG-related credit facility
      Hamilton Lane raises $3.9 billion for fifth secondary fund
      PSG closes first Europe-focused fund at $1.5 billion
    • AEW chooses head of fund operations and debt finance
      Sebastiano Ferrante and Jocelyn de Verdelon
      PGIM Real Estate turns to staff to fill new roles
      European managers key in on specialist strategies
      Ingrid Jacobs
      Jones Lang LaSalle brings on head of diversity and inclusion
    • Neal and Brady
      Retirement security could be only issue both sides accept
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
      Shawn O'Brien
      Annuities coming to target-date funds, but not right away
      David Ireland
      Sponsors returning to questions about in-plan annuities
    • Charging Bull, sometimes referred to as the Wall Street Bull or the Bowling Green Bull, a bronze sculpture that stands on Broadway just north of Bowling Green in the Financial District of New York City
      Top-performing managers Q4 2020
      P&I 1,000 largest retirement plans: 2021
      Retirement in emerging markets
      Outlook 2021
    • U.S. still a key market for investors
      Collected coverage of P&I's 2020 WorldPensionSummit
      Pedestrians pass a large advertisement on the Arndale Center shopping mall reading 'Act now to avoid a local lockdown' in Manchester, England
      COVID-19 puts new opportunities and risks on the agenda - WPS panelists
      Screens display stock price information over the trading floor of the NYSE Euronext exchange in Paris
      Private assets will continue to grow in portfolios – WPS panelists
  • Data
    • Research Center
    • Searches & Hires Database
    • Searches & Hires News
    • RFPs
    • Charts / Infographics
    • Sponsored Research
    • Trackers
    • Q2 2020 searches and hires overview report
      Q2 2020 money manager M&A activity summary
      Q2 2020 legal overview report
      Q1 2020 searches and hires overview report
    • University of West Florida Foundation assigns $5 million to private credit
      Pontiac General Employees drives $5 million into real estate
      Minnesota taps Albourne as first private markets consultant
      LGPS Central seeks managers for targeted return strategy
    • University of West Florida Foundation assigns $5 million to private credit
      Pontiac General Employees drives $5 million into real estate
      Minnesota taps Albourne as first private markets consultant
      LGPS Central seeks managers for targeted return strategy
    • Financial Auditing Services
      Actuarial Services
      Emerging Market Equity Manager Services
      Securitized Credit Manager Search
    • Taiwan Semiconductor’s No. 1 in the emerging markets book
      U.S. fixed-income returns post another positive year
      Nasdaq delivers an impressive year
      U.S. dollar's recent decline continues
    • Institutional Investors: Shared Expectations, Divergent Paths
      Global Investor Study 2016
      Workplace Financial Wellness
    • U.S. Endowment Returns Tracker
      Pension Fund Returns Tracker
      Earnings Tracker
      Corporate Pension Contribution Tracker
  • Insights
    • Opinion
    • White Papers
    • Industry Voices
    • Letters to the Editor
    • Partner Content
    • Publisher's Update
    • Tesla cartoon
      Don’t confuse wealth creation with retirement saving
      Top 1000 cartoon
      Top 1,000 retirement plans weather storm just fine
      Infrastructure cartoon
      You must go big on infrastructure, Mr. President
      Retirement cartoon
      Hopes rising for retirement readiness in 2021
    • Investment Trends: Looking Ahead Across Equity Sectors
      Rethinking Market and Reference Data Management
      China is embarking on a new stage of growth
      Gold Outlook 2021
    • Sameer Shalaby
      Commentary: Why should investors care about treasury management?
      David Blitzstein
      Commentary: Without a national retirement policy, Americans face a future of pension crises
      Lawrence Cunningham
      Commentary: Gensler should keep Clayton’s pragmatic proxy adviser rules
      My-Linh Ngo
      Commentary: Pension funds and the role of the debt market in the fight against climate change
    • Writer using a typewriter
      OCIO industry needs to adopt GIPS
      Writer or journalist workplace. stock illustration
      Even as it assails China, Trump administration emulates it
      Skeptical of Main Street support for proxy adviser proposal
      Focus on manager diversity pushes asset owners’ to walk the talk
    • P&I Content Solutions
      How will gold react?
      To people shaking hands
      P&I Content Solutions
      Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
      Sponsored Content By MassMutual
      Leveraging Data to Manage Risk
      Sponsored Content By iShares
      ETFs are becoming a cornerstone of insurance equity portfolios
    • Help us help you by supporting quality journalism
      You Must Believe in Spring
      Everything Must Change
      Tomatoes & Investments
  • Multimedia
    • Videos
    • Webinars
    • Polls
    • Slideshows
    • Charts / Infographics
    • watch video
      0:45
      Private funds weathered 2020 turmoil
      watch video
      0:59
      Secure choice and other retirement plans at a state level
      watch video
      3:33
      P&I 1,000 by the numbers 2021
      watch video
      1:33
      A look at hiring activity in 2020
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
    • POLL: Working after the pandemic
      POLL: The year ahead for the 1,000 largest U.S. retirement funds
      POLL: The Biden administration’s economic plans
      POLL: Retirement issues in 2021
    • view gallery
      9 photos
      Coronavirus and the markets
      view gallery
      22 photos
      The 1,000 largest retirement funds: 2020
      view gallery
      10 photos
      Outlook 2020
      view gallery
      10 photos
      2019 as seen through the eyes of Roger
    • By the Numbers for February 2021
      Top Performing Managers of Convertibles, 4th Quarter 2020
      Top Performing Managers of Domestic Growth Equity, 4th Quarter 2020
      Top Performing Managers of Domestic Limited-Duration Fixed Income, 4th Quarter 2020
  • Events
    • Conferences
    • Webinars
    • Defined Contribution Spring Virtual Series
      DC Investment Lineup Virtual Series
      ESG Investing Virtual Series
      Private Markets Virtual Series
    • Emerging Markets: Expanding Investors’ View
      2021: A Fixed Income Odyssey
      Technology is the New Oil: The Changing Nature of Emerging Markets
      Powering the Change: The power of diversity and inclusion
  • Careers
  • Research Center
MENU
Breadcrumb
  1. Home
  2. ALTERNATIVES
September 21, 2020 12:00 AM

Investors answer call over infrastructure

European governments make changes that will spur investing climate

Paulina Pielichata
  • Tweet
  • Share
  • Share
  • Email
  • More
    Reprints Print
    Declan O'Brien
    Declan O’Brien said French changes will be welcomed by investors.

    European countries are paving the way for institutional investors to increase exposure to infrastructure assets by launching fiscal programs and changes to retirement plan rules.

    Amid the ongoing battle with the coronavirus pandemic, the French, Dutch, Swiss and U.K. governments are all moving infrastructure higher on their priority lists.

    For the governments, the push would help renew aging infrastructure and spur new industries such as solar energy while providing jobs for the unemployed. For investors, the initiatives offer the potential of snagging higher returns as fixed-income assets continue to disappoint.

    France and the Netherlands each unveiled fresh stimulus programs on Sept. 3 and Sept. 7, respectively. The French government will make a fiscal injection of €100 billion ($118.4 billion) into its economy over the next two years with a heavy focus on sustainable transportation and green energy, while the Dutch government will spend €20 billion over the next five years to improve the country's overall infrastructure.

    Simultaneously, the Swiss government — in a move that is said to have been accelerated by the pandemic — is allowing pension funds to devote a greater share of their assets exclusively to infrastructure, effective Oct. 1.

    In a similar modification to retirement plan rules, the U.K. government proposed Sept. 11 to exclude direct investments in illiquid assets from fee cap rules to better enable infrastructure investments by defined contribution plans.

    All of these developments are expected by sources to facilitate better access for institutional investors to infrastructure investments. The changes come as the demand for infrastructure strategies is set to return to its pre-pandemic levels, with investors showing more interest in the past two months, sources added.

    Bloomberg

    Construction cranes stand among building structures at the Tesla Inc. Gigafactory site in this aerial view in Gruenheide, Germany.

    Down in second quarter

    Europe-based infrastructure fundraising dropped in the second quarter, with six funds closing at an aggregate $2.1 billion, down from 11 in the first quarter that raised $6.7 billion, according to data by London-based alternative assets data firm Preqin Ltd. But in the third quarter through Sept. 11, there have been six fund closings that raised an aggregate of $10.2 billion.

    By comparison, Europe-focused funds raised $46 billion in all of 2019 and $49 billion in 2018.

    "The €100 billion French fiscal measures as well as the Green Deal are going to result in new projects becoming available to institutional investors," said Declan O'Brien, London-based head of infrastructure research and strategy at UBS Asset Management's real estate and private markets business, which has $4.5 billion invested in infrastructure.

    The Green Deal is a European Union investment program announced at the start of the year aimed at channeling €1 trillion from public and private investors over a decade to curb greenhouse gases, support industries and protect workers in the transition to a carbon-neutral economy.

    Since the global financial crisis, the supply of greenfield projects has been lower while governments have also moved away from the private finance models, Mr. O'Brien said.

    "The (new) measures will result in more 'shovel-ready' projects moving forward," he said.

    Mr. O' Brien added that his firm recently moved its private market portfolios to overweight infrastructure equity and debt in the energy transition and telecommunication sectors but remained neutral on transportation due to pandemic-related uncertainty about the sector.

    For investors looking to boost green investments, the new infrastructure programs are exciting.

    For example, PenSam, the 115 billion Danish kroner ($18 billion) multiemployer plan for elder care, technical service and education workers based in Farum, Denmark, will increase its green investments to 10% of its portfolio by 2025 from about 5% currently.

    Among these ambitions is infrastructure, which is just 2% of the portfolio currently, said Mikael Bek, the fund's head of environmental, social and governance. Mr. Bek said the fund had to be prudent because in the past few years, there have been fewer infrastructure projects with the right risk profile and high enough returns. The fund is seeking a target allocation of between 3% and 4%.

    More details

    Other investors want more details on the policies before they jump on any opportunities.

    Ron Boots, Amsterdam-based head of infrastructure for Europe at APG Asset Management, the manager of the €462 billion Stichting Pensioenfonds ABP, Heerlen, Netherlands, said that while the fiscal programs as well as the Green Deal "are interesting developments," he wants to see the policy direction.

    Mr. Boots noted that investing directly in infrastructure equity though a public-private partnership has been challenging in the last few years, mainly because of a small supply of projects and small equity stakes available in the capital structure of such projects.

    In addition, investors like APG, in some cases can only acquire up to 50% of the equity of an investment due to tax-related reasons and therefore need other partners to participate.

    Under the Green Deal, however, the European Investment Bank will step in and share the financing with investors. At least €45 billion will be dedicated to green and social infrastructure investments from the EU's budget under the deal and up to €30 billion is expected to be committed jointly by the European Commission and the EIB.

    APG's 3% allocation to infrastructure equity is below the manager's strategic target of 4%, Mr. Boots said, adding that he is currently interested in telecommunications, utilities and renewable energy projects.

    Frans Heijbel, head of international real assets at the 893 billion Swedish kroner ($102 billion) Alecta Pensionsforsakring, Stockholm, said that now that deal flows are "back to normal," investors are enthusiastic about infrastructure. Alecta, which is planning to increase its exposure to infrastructure to €3 billion over the next five years from €600 million, intends to move ahead with one or two more commitments to renewable energy and digital infrastructure funds before the end of this year, he said.

    In other developments, Swiss pension funds are set to benefit from new rules that would allow them to invest up to 10% of their portfolios in infrastructure starting in October. Before the change, which will make infrastructure a separate allocation, the asset class was considered part of an allocation to alternatives, which is capped at 15% of portfolios.

    Joel Huebscher, infrastructure debt portfolio manager at the 41 billion Swiss franc ($44.9 billion) Swiss Federal Pension Fund PUBLICA, Bern, said in a telephone interview the fund has been ramping up the asset class since it was added to the portfolio in 2015 and he looks forward to investment opportunities resulting from attractive credit spreads observed in private markets.

    PUBLICA is underweight cyclical sectors such as transport and overweight non-cyclical sectors such as renewable energy, Mr. Huebscher said, adding that renewable energy has been resilient in the crisis.

    Commenting on the change in the Swiss law, he said that Swiss pension funds will be attracted to infrastructure when it is not part of alternative asset allocation. Swiss pension funds view alternative investments as risky, he said. When infrastructure is not part of alternative investments, it could be perceived as a safer investment, he added.

    The fund's strategic allocation to infrastructure is 3.5%, while actual allocation is about 3%.

    Bloomberg

    A workman lays bricks on a residential construction site, operated by Persimmon Plc, in Towcester, U.K.

    U.K. proposal

    In the U.K., defined contribution plans could similarly increase infrastructure exposures in October 2021 under a current proposal to enable plans to pay performance fees on strategies featuring illiquid assets. Currently, U.K. DC plans are bound by a 0.75% fee cap on assets under management and administration. Illiquid investments are more expensive investments and could cost 40 to 50 basis points compared to a few basis points plans typically spent on passive equity, sources said.

    Stephen Budge, principal and DC investment consultant at Lane Clark & Peacock LLP in London, added that DC plans are looking to diversify sources of return and the long-term infrastructure investments are going to be encouraged by the U.K. government. There are expectations that DC plans will flock to U.K.-focused environmental infrastructure, he said.

    Related Articles
    Building trades and private equity group join forces
    Most alternatives managers predict no investment changes due to COVID-19
    KKR AUM jumps on record $16 billion fundraising
    Recommended for You
    BentallGreenOak agrees to acquire Metropolitan Real Estate Equity
    BentallGreenOak agrees to acquire Metropolitan Real Estate Equity
    Aviva Investors promotes from within for real assets CIO
    Aviva Investors promotes from within for real assets CIO
    More alts managers seek expansion to retail market
    More alts managers seek expansion to retail market
    Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
    Sponsored Content: Lessons From 2020: Today’s OCIO Model Passes a Major Test of Governance
    sponsored
    Events
     
     
    Sponsored
    White Papers
    Rethinking Market and Reference Data Management
    Investment Trends: Looking Ahead Across Equity Sectors
    China is embarking on a new stage of growth
    Gold Outlook 2021
    Shifting DC Times - Winter 2021
    GP-LED OPPORTUNITIES AT THE SMALLER END OF THE MARKET
    View More
    Sponsored Content
    Partner Content
    The Industrialization of ESG Investment
    For institutional investors, ETFs can make meeting liquidity needs easier
    Gold: the most effective commodity investment
    2021 Investment Outlook | Investing Beyond the Pandemic: A Reset for Portfolios
    Ten ways retirement plan professionals add value to plan sponsors
    Gold: an efficient hedge
    View More
    E-MAIL NEWSLETTERS

    Sign up and get the best of News delivered straight to your email inbox, free of charge. Choose your news – we will deliver.

    Subscribe Today

    Get access to the news, research and analysis of events affecting the retirement and institutional money management businesses from a worldwide network of reporters and editors.

    Subscribe
    弊社の関連事業
    • RSS
    • Twitter
    • Facebook
    • LinkedIn

    P&Iのミッション

    "機関投資家向け市場で資金運用を行う経営者に向けてニュース、リサーチ、分析を継続配信すること”

    pilogo-NEW
    About Us

    Main Office
    685 Third Avenue
    Tenth Floor
    New York, NY 10017-4036

    Chicago Office
    150 N. Michigan Ave.
    Chicago, IL 60601

    Contact Us

    Careers at Crain

    About Pensions & Investments

     

    Advertising
    • Media Kit
    • P&I Content Solutions
    • P&I Careers | Post a Job
    • Reprints & Permissions
    Resources
    • Subscribe
    • Newsletters
    • FAQ
    • P&I Research Center
    • Site map
    • Staff Directory
    Legal
    • Privacy Policy
    • Terms and Conditions
    • Privacy Request
    Pensions & Investments
    Copyright © 1996-2021. Crain Communications, Inc. All Rights Reserved.
    • NEWS
      • Asset owners and the coronavirus
      • Alternatives
      • Consultants
      • Coronavirus
      • Defined Contribution
      • ESG
      • Frontlines
      • Hedge Funds
      • Investing / Portfolio Strategies
      • Money Management
      • Pension Funds
      • People Moves
      • Private Equity
      • Real Estate
      • Searches & Hires News
      • SECURE Act
      • Special Reports
      • WorldPensionSummit
    • Data
      • Research Center
      • Searches & Hires Database
      • Searches & Hires News
      • RFPs
      • Charts / Infographics
      • Sponsored Research
      • Trackers
    • Insights
      • Opinion
      • White Papers
      • Industry Voices
      • Letters to the Editor
      • Partner Content
      • Publisher's Update
    • Multimedia
      • Videos
      • Webinars
      • Polls
      • Slideshows
      • Charts / Infographics
    • Events
      • Conferences
      • Webinars
    • Careers
    • Research Center