As a growing amount of institutional capital sets its sights on a limited supply of deals in 2015, alignment and discipline will likely become ever more crucial to the success of institutional investors’ infrastructure strategies.
Brett Himbury, chief executive of Australian fund manager IFM, says the prevalence of a low interest rate environment will continue to push prices up in the context of a relative shortage of assets. “Investors will keep on looking for investment options to match assets with their liabilities, as a result of which there will be a continued interest for both infrastructure equity and debt.”
The loose liquidity macro-environment will also play a part in limited partners’ hardening expectations, as most investors continue to seek greater alignment and value for money out of their general partners (GPs).
“Notwithstanding the high level of demand for infrastructure investments and the high level of supply we’ll also start to see the emergence of greater pressure on managers which are either misaligned, overpriced or not performing.”
At the political level, Himbury hopes to see a number of G20 nations “put their rhetoric into actions” when it comes to put the frameworks and policies in place to drive a greater involvement of private capital in infrastructure. “This happened in Australia a few years ago, when after a long period of inaction some clear commitments and policies changed the national debate.”
He expects IFM to enjoy a healthy deal flow, with a number of processes already on the go. Infrastructure debt, in particular, is likely to see its profile further raised.
“There is an enormous asset allocation to fixed income across Northern Hemisphere markets. Increasingly we see some large pension funds shift part of this budget into infrastructure debt.”