Compared with a current allocation of around 0.5 percent of their total portfolios, German institutional investors are looking to increase the amount allocated to infrastructure to around 2.0 percent by 2016. This is one of the key findings in a new survey produced by the Research Center for Financial Services at the Steinbeis University Berlin with the support of DekaBank.
The survey – entitled Risk and Return Profiles in Equity and Debt Capital Investment in Infrastructure – says that, in 2012, German institutional investors had around €7.5 billion in equity capital committed to infrastructure. However, by 2016, the equity capital figure is predicted to rise to €25.0 billion, with an additional €9.5 billion committed to debt capital – making a total of €34.5 billion (and new business of around €27 billion).
However, there are obstacles to this ambition being realised, with the survey pointing to “implementation difficulties”. It says there is a “limited offer of attractive investments” and also says that, because the asset class is “comparatively young”, “many investors who have not previously invested in infrastructure are still involved in a screening process to assess the chances and risks of investments”.
The survey also found the complexity of the asset class creating problems, with “any overarching statements regarding the characteristics of the entire investment class almost impossible”. This “increases the complexity facing investors if they wish to allocate infrastructure investments within the portfolio”.
While infrastructure offers a “wide spectrum” of investments and/or projects, the survey found that investors in the asset class are primarily looking for “safe and predictable cash flows and high value stability” from “monopoly-like” investments.