Keeping it real
I'm on my way to Brussels for a meeting. Since my car is in the garage for its annual service I decide to take the train. In the old days it used to take three hours from Amsterdam to Brussels but, since we built the new high-speed rail line, it takes less than two. I say we built it, but actually the Belgians built their own part and finished a lot later than we did.
So, as the Thalys train glides through the Dutch countryside, I drink my coffee and check through my emails on my laptop. Somewhere in the newspaper I remember reading that the world needs $2trn (€1.4trn) of infrastructure assets annually by 2030.
‘What an investment opportunity high-speed rail must be!' I think to myself as I look at the price of my ticket and wonder if Wasserdicht Pension Fund should consider infrastructure investments.
There are a lot of positive aspects. First, no one is going to make a toll-road, a rail line or a power grid disappear overnight like Lehman, so we are in for the long term. On top of that, the cash flows might be good for our LDI strategy. Also, they are likely to be linked to inflation and that is one of our concerns right now.
So, when I get back to the Wasserdicht office in Utrecht the next day I call Jan, our investment consultant. ‘What do you want to know about infrastructure?' he asks. ‘Well, put it this way, is it as great an opportunity as it seems?'
‘You've got to think of a lot of things,' says Jan: ‘tax, structuring, cash flows. Do you want to invest in transport, energy or social infrastructure or on a multi-sector basis? And do you want to diversify to emerging markets, where the political risks might be high?'
Jan continues: ‘The truth is that listed vehicles are correlated to equities and, although there are dozens of unlisted funds raising money right now, they are not structured favourably for pension funds like you and you need to invest a lot of time to understand the cash flows.
‘In fact, we are helping a number of Dutch funds to buy an infrastructure book directly from an investment bank in London. Do you want to be part of it?' Jan adds. ‘What are the terms?' ‘We'll have to discuss that. But I think it will work out well for you. Your trustees will like the fact that one of the assets is a public-private partnership investment in a school building near Utrecht, not to mention a hospital in Heerlen. We will even run the vending machines there.
‘We are holding a seminar on infrastructure at our offices next month. Would you like to attend?' ‘And what's the downside?' I ask. ‘Oh Pieter,' says Jan. ‘Our fee will be very modest! And on the upside we can get you into a windfarm project off the coast of Friesland so you will be able to put some pictures in your annual report and say that you are ESG compliant.'
‘Nice touch,' I think, as I put the phone down. I think I'll do some reading over the weekend and call the chairman of trustees next week.
Pieter Mullen is investment director at Wasserdicht Pension Funds