91传媒在线鈥� latest survey of institutional investors suggests that infrastructure has become an even more attractive asset class due to its stability during the COVID-19 crisis, its potential to protect against inflation and the role it can play in ESG and energy-transition strategies.
According to the study, most investors either thought infrastructure had become more attractive over the past two years (46%) or its appeal had remained the same (42%). The findings, published here, were debated at the in Munich last week.
During a conference panel session, after the results were revealed, Christian Fingerle, senior managing director at private markets investment adviser StepStone Group, said interest in the asset class from investors was 鈥渦nabated鈥�.
He said: 鈥淔rom the existing clients, we still see huge demand, it鈥檚 growing ever. We also see many new clients being interested in infrastructure and trying to see how they can access the asset class.鈥�
Jan-Willem Ruisbroek, head of infrastructure investment strategy at APG, was interviewed on stage about how the Dutch institution鈥檚 infrastructure strategy had evolved from its inception 18 years ago.
鈥淚鈥檝e seen the outcome of the survey,鈥� he told conference delegates, 鈥渁nd the arguments for investing in infrastructure were exactly the same as they were back in 2004 and 2005: inflation linkage, long-term stable cashflows and diversification to the portfolio鈥�.
Ruisbroek, interviewed by editorial director Liam Kennedy, added: 鈥淚nterestingly enough, ESG was not a factor at that point in time鈥� so, it is quite interesting to think about ESG and how it has evolved.鈥�
Fellow panellist Katherine Laurenson, director at Legal & General Investment Management, cited the growing importance in ESG in the relative attraction of infrastructure.
鈥淲e have been investing in infrastructure on behalf of both our balance sheet and our clients since about 2014, and at that point it was regarded as a diversification to our fixed income offering,鈥� she said. 鈥淣ow, our internal client and our external clients see it very much as a route to true impact investing, a route to truly investing in the real economy and bringing about real results and social purpose.
鈥淚 agree, [the attraction] has not abated at all, and in some cases I think actually increased.鈥�
Josie McVitty, senior adviser for infrastructure at New Zealand Superannuation Fund, explained how the sovereign wealth fund has been seeking to increase its exposure to the asset class and that ESG has been a very important driver.
McVitty, who is interviewed as one of a number of investor case studies in the latest 91传媒在线 magazine, said: 鈥淲e see infrastructure as one of the ways that we can actively invest to advance the net zero agenda, and we want to be visible and in that space,鈥� she said.
But investors questioned the extent to which infrastructure can provide a hedge against inflation. The 鈥渢heory for infrastructure鈥� has always been the provision of explicit and implicit inflation-linked revenue streams, Fingerle said, but he admitted that it might prove difficult to pass today鈥檚 high inflation through to consumers amid a growing cost-of-living crisis and 鈥渁gainst the backdrop of social inequality鈥�.
Investors potentially face 鈥渁 very hard discussion with other partners, with management and with the politicians and regulators on how that can actually be enacted in a way that works for everybody鈥�, he said. 鈥淪o I think there is a risk that this may not work as perfectly in this high-inflation scenario.
McVitty said that, while there was a 鈥渉eightened focus on the short-term implications of inflation鈥�, along with greater potential political and regulatory risk, 鈥淚鈥檓 not sure it鈥檚 fundamentally changing how we think about infrastructure鈥�.
Ruisbroek also questioned assumptions that infrastructure provides inflation protection. 鈥淵es, infrastructure revenues, top-line cashflows are often inflation linked,鈥� he said, 鈥渂ut I have not come across an academic paper that actually proves that the valuation of infrastructure is linked to inflation鈥�.
But what has 鈥渁ctually proven to be right is diversification and good returns鈥�, he said. 鈥淭he correlation to other asset classes has been low and the return contribution has been high. And that, of course, in itself is already a good reason to invest in infrastructure.鈥�
