EDHECInfra to ask Norway to reconsider SWF infra stance – exclusive

The institution believes its data could provide the assurances needed for the $1trn Government Pension Fund Global to invest in infrastructure.

Singapore-based EDHEC Infrastructure Institute will ask Norwegian Minister of Finance Siv Jensen to reconsider the government’s stance and allow the Government Pension Fund Global, the world’s largest sovereign wealth fund, to invest in unlisted infrastructure equity, according to a letter seen by Infrastructure Investor.

In the letter, EDHECInfra recognises the government was right, on the basis of a lack of data and industry practices, to steer the GPFG away from unlisted private equity, but believes its research and indices are a game-changer for the infrastructure asset class. The letter follows an April government decision to prevent the GPFG’s mandate from including private equity.

“Considered in the light of past academic research and industry practices, your proposal not to allow the GPFG to invest in unlisted equity was, we believe, reasonable and justified,” EDHECInfra wrote in its letter.

However, given the evolution of unlisted infrastructure into a more transparent and better benchmarked asset class, “this concern is no longer justified”, EDHECInfra stated.

The institution pointed to its work over the past three years compiling what it calls “the largest database of infrastructure investment data in the world”, which it said “will reach global coverage by 2019 and be used to compute full-fledged market benchmarks reflecting the risk-adjusted performance of private infrastructure investments, including in the renewable energy sector”.

The latter is of particular interest to the Norwegian government, which stated in April it was studying the possibility of allowing the GPFG to invest in unlisted renewables infrastructure, provided those investments have “the same transparency, return and risk requirements as apply to other investments in the GPFG”.

EDHECInfra further pointed out that its equity and debt data can help “the private infrastructure asset class […] cease to be opaque and expensive”, arguing that, “with better data and industry practices, unlisted infrastructure investment may offer significant benefits to the fund [GPFG], as long as these benefits can be demonstrated”.

The institution has recently surveyed more than 200 respondents, to establish their preferences for the segmentation of infrastructure.

The  NKr8.1 trillion ($1 trillion; €844.2 billion) GPFG had a 66.6 percent allocation to equity investments, 30.8 percent to fixed income and 2.6 percent to unlisted real estate as at 31 December 2017, according to its website. It achieved a 13.7 percent return for 2017, up 0.7 percent on its benchmark index, according to its latest annual report.