DWS lauds US market for investors ‘to diversify their European portfolios’

The group believes that the US will ‘gradually’ offer opportunities for private investors beyond the energy sector.

DWS believes that investors looking to diversify their European portfolios should looks to the US market, it said in a report.

The listed asset management arm of Deutsche Bank acknowledged that the current US market does not provide the range of investment possibilities offered by Europe but is anticipating this to grow beyond the opportunities traditionally offered by the energy sector.

“Looking ahead, we expect an increase in private sector involvement in US infrastructure projects, and believe that the renewed policy focus on infrastructure will gradually offer more opportunities for investors to build diversified infrastructure portfolios beyond the energy sector,” DWS said in its European Infrastructure Strategic Outlook.

The optimism has been swelled by an increasing number of states adopting PPP frameworks, although DWS acknowledged that difficulties in this area persist.

The report also identified the long-term contracted nature of US power assets as an element of the industry which is far more limited in Europe. While it remains bullish on the opportunities provided by renewables in Europe, DWS says it is wary of the risks posed by the ending of subsidies. It has, however, identified the UK and Germany as strong markets to invest in energy-from-waste projects.

The firm said it is positive on the UK overall, although it is mindful that a hard Brexit would have short-term negative effects, particularly on assets such as ports. The group remains a part owner of Peel Ports, which it is believed it is trying to sell.

Germany, the Netherlands, the Nordics and Spain also remain strong markets, it said, adding that Portugal has now joined this group “supported by stronger economic and institutional fundamentals and lower country risk”.

DWS is believed to be at the early stages of fundraising for its third infrastructure vehicle, targeting about €3 billion. While the strategy will continue to focus on Europe, there is thought to be flexibility to invest outside of Europe, as was the case for its previous funds.