mast image

Special Report

Impact investing

Sections

IFM warns against unsustainable infrastructure debt pricing

Related Categories

GLOBAL – Investors should be wary of expecting unrealistic or unsustainable returns from infrastructure debt, according Industry Funds Management (IFM).

Robin Miller, global head of debt investments at IFM, warned that some new entrants to infrastructure debt could be basing their return expectations on unrealistically aggressive pricing.

He told IPE sister publication IP Real Estate: “We think there are a fair number of people who have come to this space having raised the expectations of their investors unrealistically.”

Miller said some new debt fund managers had “positioned” infrastructure debt products as being “low risk but with a high return”.

<

“They haven’t considered what that means for the implied social equation,” he said.

A number of infrastructure fund managers have set up debt platforms to take advantage of the lack of bank lending in the sector.

Last year, IFM hired David Cooper to head up its debt investment programme in Europe, and the company is looking to appoint someone to lead its US expansion.

Although governments are under pressure to seek private sector financing for their infrastructure needs, Miller believes there will be a limit at which governments will say, “you’re asking for too high a return, we can’t do it that way”.

Miller said IFM had “a more realistic view of where that market price should settle”.

He added: “We want to say, let’s be realistic, because then privatised infrastructure debt will work and satisfy the needs of society as well as investors.

“This perhaps subtle shift in pricing emphasis then has a better chance of unlocking a government-led asset supply.”

Miller said a lot of the “early money drawn to this space” came from credit investors “chasing yield” and attracted to what they saw as a “high-returns-for-low-risk asset class”.

He added: “We would always emphasise that you must maintain low risk first and foremost.

“The uplift you should expect to get from being in infrastructure debt should be realistic and rely on the predictability of the asset class while offering investors a decent premium for the low liquidity of the investment.”

IPE and Stirling Capital Partners are co-hosting a conference, Infrastructure for Pension Funds and Other Capital Owners, to take place on 2 October in London. For more information, click here.

Related images

  • IFM warns against unsustainable infrastructure debt pricing

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2548

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 300-400m.
    Closing date: 2019-07-30.

  • QN-2549

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 300-700m.
    Closing date: 2019-07-30.

  • QN-2550

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2551

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2552

    Asset class: Fixed Income, High Yield (Active).
    Asset region: High Yield (US).
    Size: CHF 500-600m.
    Closing date: 2019-07-29.

  • QN-2553

    Asset class: Fixed Income, High Yield (Passive or Passive Enhanced).
    Asset region: High Yield (US).
    Size: CHF 500-1'100m.
    Closing date: 2019-07-29.

  • QN-2554

    Asset class: Global Real Estate (Equity, unlisted Funds).
    Asset region: World (ex-Switzerland).
    Size: CHF 200 mn (potential for further growth).
    Closing date: 2019-08-07.

  • QN-2555

    Asset class: Real Estate.
    Asset region: European.
    Size: EUR 50 - 100 million.
    Closing date: 2019-07-22.

  • QN-2556

    Asset class: FX Hedging.
    Asset region: Global.
    Size: Mandate size of CHF 1.5 bn.
    Closing date: 2019-08-09.

  • QN-2557

    Asset class: All/large Cap Equities.
    Asset region: China A-shares.
    Size: Unit linked platform (0m USD in initial investment).
    Closing date: 2019-08-01.

Begin Your Search Here
<