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II New York Summit: Interest rates creating an LP ‘fight for yield’

An investor at this week’s New York Summit said LPs are wise to 'lock up contractual income’ as foreign institutions seek access to the US market.

The “fight for yield” is pushing foreign LPs to the US infrastructure market and leading domestic investors into niche sectors to capture long-term value, one institutional investor warned at Infrastructure Investor’s New York Summit this week.

Speaking under the Chatham House rule, the representative of a US family office said their team was focusing on “more niche” infrastructure sectors like logistics companies and waste-to-energy businesses to “lock up contractual income”.

“In a world where interest rates are zero, the US is one of the few places left with yield,” the investor said. “You better capture that contractual income, because I think we’re heading in the same direction.”

The transition from traditional fixed-income assets to “something with higher yield” was “just boardroom talk” five to seven years ago. Today, it’s being taken “very seriously”.

“As you see pension funds, insurance companies sit in their boardrooms – whether it’s in Tokyo or Frankfurt or New Jersey – they are talking about this lack of yield,” the investor said. “Investors in countries with zero percent interest rates are flocking from all over the world and are in competition with American LPs to find yield.”