EUROPE – Deutsche Bank says infrastructure projects in central and eastern Europe can be “quite lucrative” for institutional investors such as pension funds and life insurers.
“For institutional investors (such as life insurance companies and pension funds) these infrastructure projects can be quite lucrative, as they usually offer a favourable return on capital employed along with a comparatively low level of volatility in returns and only low vulnerability to business cycles,” the bank said in a report.
“Owing to the persistent scarcity of funds in the EU budget and in member countries’ budgets, the activation of private-sector capital will play a major role in the financing of infrastructure projects,” the report argued.
“Full privatisation is only one conceivable way to ease the pressure on the public purse. There is a broad spectrum of innovative financing models which allow the participation of private investors.”
The report, written by Josef Auer, said that without a good basic infrastructure in the new European Union member states “the vision of a modern Europe with favourable living conditions in all regions will remain a pipe dream”.
It said the countries would have to invest a total of around 500 billion euros to attain the same standard of infrastructure as the old EU.
Earlier this week Barclays Capital argued that pension funds in the UK should be looking at investing in infrastructure as a way of dealing with long-term liabilities. “Pension funds should definitely invest in these long-run infrastructure projects,” John Maskell, the firm’s head of European rates strategy, said.
And in April it emerged that ABP, Generali and Oslo Pensjonsforsikring were among investors in 422 million-euro pan-European infrastructure fund set up by Australia’s Macquarie Bank.