Asset recycling buoys investor sentiment in Asia

Fund managers are starting to deploy divergent strategies to try and capture opportunities in the world's fastest-growing region.

The sheer presence of nearly 200 attendees to Infrastructure Investor’s Global Investment Forum in Hong Kong this week conveyed one clear message: in Asia too, demand for infrastructure investments is reaching new peaks.

Many investors had come to find out how to translate this appetite into tangible assets. A dedicated panel came up with a simple answer: arm yourself with patience and a good business plan.

Danny Latham, a partner at Australia’s First State Investments, said the growth of infrastructure asset class to a size similar to that of real estate and private equity justified its existence as a separate asset class.

Andrew Bishop, a partner at US fund manager Alinda Capital Partners, observed that Asian capital was still in the process of getting more comfortable with the idea.

He believed that sovereign wealth funds would continue to take a prominent role in making both direct investments and fund commitments over the coming decade.

When it came to identifying opportunities around the globe, panellists suggested investors should keep an eye on ‘recycled assets’.

Nodding at the recent auction of Australia’s TransGrid, Latham said this recycling has been providing huge investment opportunities – especially for global capital wishing to invest in mature markets.

He cited Australia’s first privatisations back in 90s, as well as UK’s water utilities and French toll roads, as examples showing that such deal flow had never really dried out.

He argued that in Asia Pacific too, enormous infrastructure demands within the region would eventually turn into brownfield opportunities, which he said the aforementioned “patience”.

Kirsten Whitehead, principal of global infrastructure at Australia-based QIC, suggested there are still undiscovered gems in those areas that are less understood, not as popular, or outside infrastructure’s traditional remit. She also saw growing interest in energy storage and battery technologies.

Balancing the interests of different parties as the main challenge, Bishop concluded, was the main challenge. “The case is that the fewer partners you have, the easier you get,” he said, before underlining the importance of stakeholder management.