EUROPE – EDHEC-Risk Institute and Natixis have launched a research chair on infrastructure debt instruments as institutional investors increasingly seek to provide project loans.
The new chair, based on a three-year partnership between EDHEC and Natixis, aims to clarify the nature and investment profile of infrastructure debt instruments.
EDHEC and Natixis said the chair would help address the relative shortfall of publicly available investment data on the subject, compared with more "established" asset classes.
Led by research director Frederic Blanc-Brude, the chair will also explore infrastructure debt instruments' risk/return characteristics and portfolio diversification benefits.
Laurent Mignon, chief executive at Natixis, said: "This partnership will contribute to facilitating the cooperation between banks and institutional investors in infrastructure debt.
"By sponsoring this chair, Natixis aims to help institutional investors play a more active role in the financing of infrastructure investments that are crucial as drivers of growth, productivity and competitiveness."
In recent years, a number of European banks that were traditionally large players in the project-finance arena have sought to offload non-core loan portfolios due to regulatory pressures associated with Basel III and CRD4.
And while some deals involving the transfer of banks' loan portfolios were signed with other international banks, corporates and asset managers, many potential deals with institutional investors fell through due to the structure of the loans.
In an interview with IPE, Georg Grodzki, head of credit research at Legal & General Investment Management, said it was a "laborious" exercise to restructure or reengineer bank loans that were often designed to suit the needs of banks.
"The loans typically offer a no or low-cost early redemption option for the borrower, which severely curtails their duration from a regulatory perspective and thus renders them unsuitable as a matching asset for long-dated liabilities under Solvency II," he said.
"Therefore, the effective maturity of many loans is too short to meet the duration requirements of insurers and pension funds."