What is Infrastructure?

What is Infrastructure?

Ahmed A. Alshamsi FNCE 4060 summer 2014

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What is Infrastructure? Ahmed A. Alshamsi

What is Infrastructure?Ahmed A. Alshamsi

Contents

•Executive Summary -------------------------------------------------------------------------------•Defining Infrastructure Assets--------------------------------------------------------------------•Infrastructure as an Asset Class ------------------------------------------------------------------

•Display 1: Estimated need of infrastructure spending by 2030------------------------•Table 1 : Top 20 infrastructure investors worldwide ---------------------------------

•Key Characteristics --------------------------------------------------------------------------------•Display 2: Queensland project ------------------------------------------------------------•Display 3: Risk/Return profile of infrastructure asset types --------------------------•Roles of Infrastructure in a portfolio -----------------------------------------------------•Display 4: Infrastructure correlation to other asset classes ----------------------------•Display 5: Private Equity Vs Unlisted infrastructure IRR -----------------------------•Display 6: Infrastructure compared to other asset class --------------------------------

•Classification of Infrastructure -------------------------------------------------------------------•Display 7: Infrastructure Main Categories -----------------------------------------------•Table 2: Infrastructure Assets; Greenfield Vs. Brownfield -------------------------•Display 8: Infrastructure Expected Returns; Greenfield Vs. BrownField -----------•Table 3:Economic Infrastructure Drivers and Opportunities ----------------------

•Access to Infrastructure ---------------------------------------------------------------------------•Display 9: International Public Partnership (INPP) price ----------------------------•Display 10: Brookfield Infrastructure Partners L.P (BIP) price ----------------------•Table 4: Brookfield Infrastructure Partners Funds list -----------------------------•Display 11: Breakdown of Global Infrastructure Assets ------------------------------•Display 12: RARE 200 universe ---------------------------------------------------------

•Theory in Action ----------------------------------------------------------------------------------•Display 13: Add infrastructure investment to institutional investor’s portfolio ---

•Conclusion -----------------------------------------------------------------------------------------•Appendix: Interview -----------------------------------------------------------------------------•Work Citation --------------------------------------------------------------------------------------

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Executive Summary:

After 2008 global financial crisis, institutional investors realized that they need a new invest-ment instrument that provide them with a predicted and steady cash flow and reduce the risk in their portfolios. This new asset class should cover the gap that the crisis caused to those inves-tors’ portfolios. Those investors were looking for a investment opportunity that has similar fea-tures to stock investments and alternative investments. They found that this new class is already existed within Real Estate asset class. Infrastructure had been always considered as a devision of real estate. After 2008, some of the big institutional investors considered infrastructure as an asset class on its own. Here is why :

• Infrastructure has low correlation to the other asset classes with a stable demand. This feature will help investors to add stability to their portfolio and reduce the risk spe-cially during recession periods.

• Infrastructure is a diverse class within its own. Investors can chose between debt fi-nancing or Equity investment. Even within those two categories investors can chose the risk they want to take based on the type of the asset, greenfield or brownfield, and the they then can access those assets, publicly listed or private Equity style.

• Lastly, the recent global recession led investors to create a new strategy to protect their portfolios from these types of recession. This new strategy will help both the in-vestors, to reduce the risk and increase the return on their portfolios, and govern-ments, to cover their shortage in maintaing and developing their infrastructure.

This paper start with definition of infrastructure. After that, the paper gives a background of the the assets class and the importance of the asset class for both institutional investors and gov-ernments worldwide. Third section delves in details the characteristics of infrastructure and its role in an investor portfolio. Forth, the paper moves us to the classification of infrastructure and takes us through some steps to how we classify an infrastructure asset to make it easier for us to analyze the assets as an investment opportunity. Fifth, it is important to explain the ways we can access to those opportunities and what are the options an investors have to access to the as-set class. Finally, Credit Suisse Asset Management found a new theory that proves the impor-tance of infrastructure in an investor portfolio and how invest in infrastructure impact the ex-pected return and risk of the portfolio. Through my interview Brandon Prater, working for Part-ners Group (UK), he explained the important of infrastructure as an investment opportunity. He also talked about the ways we can access to those investments.


Defining Infrastructure Assets: 1

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Many describe infrastructure as the backbone of the global economy. As an asset class, infrastructure investors invest in the underlying, essential net-works and services that play an important role in the function of the global economy. Infrastructure assets incorporate long-life and physical assets that are di-vided into five main sectors. Those sectors are transportation (toll roads, airports), regulated utilities (water, waste), communication (cell towers), social infrastructure (hospitals, schools) and energy (pipeline, power plants). I will go in more details about these sectors and how it was classi-fied later in this report.

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Infrastructure as an asset class:2 Recently, investors started to look at infrastructure as an asset class that

they need to look at seriously. Investors, especially institutional investors, have splits into two groups; one group looks at infrastructure assets as a part of real estate assets, other group view infrastructure as an asset class on its own. In many developed markets, such as Australia, the UK and North America, consider infrastructure as an asset class on split from real estate. They think they need to invest a lot in infrastructure to support their economy’s growth. Quantifying the global infrastructure assets is a very difficult task because most of those assets are government owned and oper-ated. In the same time, Most of the governments around the world are un-able to supply infrastructure project because of the large deficits. This shows us that there are an immense potential for those government to pri-vatize their infrastructure assets, which will help those government to re-duce a great amount of the deficit they have. Through privatization, govern-ments will be able to develop their economy faster by building new assets, and expand and renovate the existing assets. The OECD, Organization for Economic Co-operation and Development, estimated $40.8 Trillion is needed for infrastructure investment around the world through 2030. The graph shows the OECD estimation of infrastructure investment globally:2

1. ALTIUS Associates, Infrastructure as part of global investment portfolio (USA, 2013), 12. ALTIUS Associates, Infrastructure as part of global investment portfolio (USA, 2013), 1

Display 1: Estimated need of infrastructure spending by 2030


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Infrastructure assets set to flourish due to number of critical factors:1. Creating new infrastructure is needed due to population and economic growth around the world. 2. Much of infrastructure assets were built over 50 years ago and they need to be rebuilt or renovate. 3. Most of the governments running deficit and they need funds from the private sector as their traditional source of funding are shrinking.

As a result, many governments understands the importance of privatize their infrastructure assets. For ex-ample, the UK government privatizes all of their water infrastructure assets and many other assets such as Heathrow airport and Gatwick airport. That had a good impact in the economy along with other factors. The UK economy is the second in the Euro- zone in economic growth after Germany.From the investor’s prospection, we can see that many investors, especially investment banks, are invest-ing heavily in infrastructure in recent years both to diversify their portfolio and fulfill the world need of private sector to invest in infrastructure. The table below shows the top 20 infrastructure investors:

Rank Name of investor Headquarters

5-year capital formed

total ($bn)1 Macquarie infrastructure and Real Assets Sydney 23.72

2 Brookfield Asset Management Toronto 11.16

3 Global Infrastructure partners New York 8.64

4 Canada Pension Plan Investment Board Toronto 8.41

5 APG Asset Management Amsterdam 7.80

6 QIC Brisbane 6.88

7 Ontario Teachers Pension Plan Toronto 6.87

8 Alinda Capital Partners Greenwich 5.90

9 Industry Funds Management Melbourne 5.51

10 ArcLight Capital Partners Boston 5.43

11 OMERS Toronto 5.02

12 Arcus Infrastructure Partners London 4.99

13 Energy Capital Partners Short Hills, NJ 4.79

14 RREEF Infrastructure London 4.35

15 Highstar Capital New York 4.25

16 Future Fund Melbourne 4.20

17 Goldman Sachs New York 4.17

18 La Caisse de Dépôt et placement du Québec Montreal 4.14

19 Morgan Stanly New York 4.00

20 JPMorgan Asset Management New York 3.90

Table 1: top 20 infrastructure investors worldwide

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1. PEI alternative insight, Infrastructure investors (USA, 2013), 2

Key Characteristics3

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As an asset class, infrastructure assets’ characteristics attract investors to take advantage of those characteristics. The combination of large, long-term assets with predictable and steady cash flow that is protected against inflation. Moreover, Infrastructure assets provide investors with little or no competition due to the high berries to entry. All of those features will help investors to diversify their portfolio. According to Brookfield Asset Man-agement in their article Why Infrastructure? They listed five main charac-teristics that is shared between listed and unlisted infrastructure asset. The following section is the list of the five feature they mentioned in their arti-cle with some extended details and real life example, which will make it easier to understand.

Key Characteristics:

• Large, long-term assets providing essential services: As I mentioned the definition of infrastructure, infrastructure assets are the backbone of any economy around the world, which is necessary to sup-port the economy and the social activity. As the community needed those essential services, the demand usually does not react much to price chang-ing. In another word, infrastructure assets have an inelastic demand charac-teristic. Infrastructure often has long duration, over 60 years in some cases. For ex-ample: Roads and tunnels have 50-years life duration; Network cable can last up to 10 years and electricity gridlines can stand over 60 years before any maintenance is required. Those assets are ore durable by institutional investors.

• Limited or no competition & High barriers to entry: Infrastructure assets require very high initial investment, which make it difficult to any investor to invest in infrastructure. That is one of the rea-sons infrastructure investments are demeaned by institutional investors as we sow in display 1. Usually the regulatory parameters limited competi-tion and in some cases they prefer to have monopolist. In the following ta-bles are projects from around the world. You can notice the high barriers to entry and there is no competition.


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The following two charts show unlisted infrastructure project in Australia. “Queensland Motorways is responsible for managing a 70-kilometer network of toll roads, bridges and infrastructure, which have expanded to include the Gateway and Logan motorways, Brisbane's Go-Between Bridge, the Clem7 tunnel, and the planned Legacy Way motorway.” The competition of buying the asset was strong and limited to 4 consortium only; Hastings-led consortium, ADIA-Trans- AusSup consortium, IFM-led con-sortium and Khazanah-led consortium. ADIA-Trans-AusSup consortium won the bid. As we can see the competition is very limited due to high barriers to entry and the winning consortium now has mo-nopolist to operate the whole project with no competition from other companies to control and operate the project. We can notice from this example that infrastructure investors usually partners to invest in those big project. This is one way that investors can access to infrastructure investment and their are many other ways that will be explained later in this paper.

Acquirer Allocation Amount ($ mn)

Transurban Group %62.5 2548

AustralianSuper %25 1012

Abu Dhabi Investment Authority (ADIA) %12.5 511

Queensland Motorways Sale (2014) Transport / Roads

Queensland Motorways Sale (2014) Transport / Roads Display 2: Queensland project

• Predictable and steady cash flows with a strong yield component: We know by now that infrastructure assets are long-term assets with life duration over 60 years. Most of infrastructure investors are look for assets with long term predicated and steady cash flows. investors in those assets sign contracts of operation with regulators to operate the asset and improve them in a way that increase the investors profitability. Those contracts or concessions usually last for more then 20 years. As i mentioned in the definition of infrastruc-ture, it provide essential services to consumers. That mean infrastructure assets have inelastic demand characteristics, which help the investors to predict and steady cash flows. These sta-ble cash flow will result in high leverage ratio on brownfield assets. The graph next page, display 3, shows the Risk/Return profile of major infrastructure assets types. We can see that three of the assets provide low risk- adjusted return, approximately 8%-10% IRR. the last type is privet-equity type, which is treated as investing in privet equity, has the highes internal rate of return (IRR) of +15% in the same time the expected Risk/ Return is the highest. This type of infrastructure asset is driven by the managers’ ability to add value and the ability to use the capital efficiently.


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1.Edwards, Alyse. “Queensland motorways sells for more then $7b to private consortium.” ABC News, 24 Apl. 2014. Web. 10 June 2014.

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Display 3: Risk/ Return profile of infrastructure asset types

• Inflation- correlated Revenues: I mentioned in the definition of the Infrastructure that its the backbone of any economy and it support the development of the economy by providing essential service to consumers. Usually infrastructure assets are linked to gross domestics products (GDP) and inflation, which both are measurements of any economy. Infrastructure investors are protected against inflation where owners can pass inflation to consumer through price increase. Investors also protected by the regulators through the concessions against any legal movement from consumer against price increases. This point help us understand better why investors have predicted and steady cash flows.

• Low Volatility and correlation to other asset classes: Most of investors nowadays looking for ways to diversify their portfolio and to recovery from the recession. The Great Recession showed correlation are dynamic and can change dramati-cally. Investors try to protect themselves against correlation by diversify their portfolio by add-ing low volatility assets to that has low correlation to other assets class. Both Real Estate and infrastructure has low correlation to other asset class as it shows next page.


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Display 4: Infrastructure correlation to other asset classes

Infrastructure assets have many similar feature as other assets classes, such as Private Equity, Fixed in-come, Real Estate and Equity. Infrastructure investors can use infrastructure as an alternative of the pre-vious list asset which depends on the investors portfolio risk/return targets. Below is a summarized list of the similarity and differences of infrastructure compared to other asset classes:

Roles of Infrastructure in a Portfolio:

• Private Equity: Private Equity feature with high barriers to entry the same as infrastructure. Investors are will to im-pose high initial cost for a higher payout. Investors of private equity know that the return of the early years tends to be low or negative but as the company mature their profitability tends to raise. It is the same scenario with infrastructure, specially with greenfield project, where investors may see J-curve of cash flow as the project mature to brownfield project. The graph below shows the Uk water infra-structure’s internal rate of return (IRR) to investors and compare it private equity.


Display 5: Private Equity Vs unlisted infrastructure IRR

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• Fixed Income:Both of the Asset classes feature with relatively steady cash flows and high yield with extended fixed-term contracts periods. Both of the asset classes provide investors with long-term investment and low market risk. But infrastructure give its investors the opportunity for growth/upside potential. As well as an ownership claim to the asset.

• Real Estate:Infrastructure and real estate are tangible assets that investors have a direct ownership claims and own them for a longer time then other asset classes. We need to mention that this scenario occurs only with unlisted infrastructure and real estate assets. In both of the asset classes, location plays an important role in the cost of the asset and the return of the asset. In real estate projects you will need to construct and develop the asset you want, it is the same with greenfield infrastructure. The major difference be-tween both of the asset class that infrastructure cash flows depend mainly on operation.

• Equity: Investors can invest in listed infrastructure, which mean they are investing in infrastructure stock mar-ket. It is the same exact stock market that people invest in. Investors simply buy shares, ownership claims, in infrastructure assets. As in Equity, Investors of listed infrastructure are looking for a poten-tial in upside return. The differences between both of the asset class that listed infrastructure have lower liquidity and investors can predict cash flows. The following graph shows three listed infrastruc-ture in the UK. They are water utility companies. The data below as September 9, 2013, from Yahoo finance.

Pennon Group PLC (PNN.L)-LSE Ticker: 18V863 / ISIN: GB00B18V8630Prev Close:

815.50Open:

812.00Bid:

803.50Ask:

804.501y Target Est:

N/ABeta:

N/ANext Earnings Date:

N/ADay's Range:

799.50 - 812.0052wk Range:

629.34 - 827.50Volume:

562,754Avg Vol (3m):

624,389

Market Cap:2.98bn

P/E (ttm):2,082.90

EPS (ttm):0.39

Div & Yield:N/A (N/A)

Quotes delayed, except where indicated other-wise. Currency in GBp.


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Severn Trent PLC (SVT.L)-LSE Ticker: 1FH8J7 / ISIN: GB00B1FH8J72Prev Close:

1,976.00Open:

1,969.00Bid:

1,958.00Ask:

1,960.001y Target Est:

N/ABeta:


N/ADay's Range:

1,958.00 - 1,995.0052wk Range:

1,626.00 - 2,011.00Volume:

397,979Avg Vol (3m):

438,171Market Cap:

4.68bnP/E (ttm):

1,080.53EPS (ttm):

1.81Div & Yield:

N/A (N/A)Quotes delayed, except where indicated otherwise. Currency in GBp.

United Utilities Group PLC (UU.L)-LSE Ticker: 39J2M4 / ISIN: GB00B39J2M42Prev Close:

866.00Open:

862.50Bid:

857.50Ask:

858.501y Target Est:

N/ABeta:


N/ADay's Range:

857.00 - 863.5052wk Range:

641.00 - 911.50Volume:

1,369,453Avg Vol (3m):

1,600,640Market Cap:

5.85bnP/E (ttm):

N/AEPS (ttm):

N/ADiv & Yield:

N/A (N/A)Quotes delayed, except where indicated otherwise. Currency in GBp.

The chart blow summarizes the key similarity and differences of infrastructure compared to the other asset classes I mentioned:

Display 6: Infrastructure compared to other asset classes


classification of infrastructure4

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We can categories infrastructure assets into two main general categories based on the type of services they provide. First category is economic infra-structure. This infrastructure category includes three main sub-categories include; communication, energy and utility, and transportation. Those sub- categories support the development and the growth aspect of the economy. The second category is social infrastructure which support the social as-pect of the country. For example, hospitals and housing. the table below shows the two main general categories with its sub-categories and provides some examples.

Display 7: Infrastructure main categories

Once we find the type of the project we want to invest in based on the previous classification, we need to take the next step of classification which it is based on the stage of development of the project. Based on the stage of development projects usually fits on “greenfield” projects or “Brownfield” projects.

In “Greenfield” projects, investors working in developing and building new infrastructure assets. inves-tors in greenfield project work in designing, financing and building those assets which means the risk is high and it is require high initial cost. The risk/return is very high because sometimes investors underesti-mate the cost of the project or some economic and environmental play a rule against the completion of the project.

On the other hand, “Brownfield” projects are already excited assets that require more efficient operation or development. Brownfield infrastructure are safer then greenfield which mean investors expected less return in the same time a steady cash flows from the first year. In greenfield infrastructure, investors will be waiting the project to be completed then expecting cash flows from their investment.

The table next page compare infrastructure assets based on its stage of development and the market they usually find in.


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Greenfield Brownfield

Another name Growth infrastructure Mature infrastructure

Risk/ Return High low

Market Emerging markets Developing markets

Table 2: Infrastructure assets; Greenfield vs. Brownfield

To show the differences in risk/return, Credit Suisse, in the chart below, showed us the differences in expected risk and expected return between greenfield and brownfield projects. As well as between those two categories and fixed income and equity.

Display 8: Infrastructure expected returns, Greenfield vs. Brownfield

As we can see, infrastructure assets are very diversified. As investors, we need to to understand the drivers for those sectors and look at their potential opportunities of investment. Credit Suisse came up with the following table that shows the biggest drivers and potential opportunities for the eco-nomic infrastructure sectors. Not forget to mention, Those are the general drivers. Investors need to study every aspect of the project from the economic and political stability of the market to the pro-ject’s aspects itself.


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Table 3: Economic infrastructure drivers and opportunities


Access to Infrastructure5

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Investors have four different ways to access and invest in infrastructure as-sets; publicly listed funds, private infrastructure funds (General partner-ships or GPs), private fund of funds and lastly direct investment. Each of those option has its own pros and cons. In the same time, investors have many options to chose from on how they allocate their capital based on their portfolios need.

• Publicly listed fund: It is the traditional listed fund. It is the same as S&P 500 but for infrastruc-ture assets only. This option includes both mutual funds and exchange traded funds. According to Credit Suisse, the advantages of this option in-clude high liquidity and relatively low transaction cost and market price. Basically, investors look at the exchange market to buy equity of infra-structure assets. Amber infrastructure is a good example for this option. one of their publicly listed fund is International Public Partnership (INPP) that is listed in London stock exchange market. the graph below reflect their price as September 24th, 2014.

Display 9: International Public Partnership (INPP) price:


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• Private Infrastructure funds (General Partnerships or GPs):This option has limited liquidity and average life span between 6 to 17 years. The most important key point of this option is investors works to improve the management and the operation of the underlying business to enhance the return and the value of the of the asset. According to Branden Prater, the head of infrastructure team in Partners Group-London, it is very important for GPs to analyze the cost of the capital and manage the risk to take better decision of investing in infrastructure project. In the same time, it is important to know who are you partner with before taking any further step in the deal. Brookfield Asset Management is a great example of this option. According to their website, brookfield.com, they own around $ 40 billion of infrastructure. They establish five infrastructure funds that investor can commit capital to any of them. The following graph is Brookfield price as Sep-tember 24th, 2014 following by their funds list.

Table 4: Brookfield Infrastructure Partners Funds list:

Display 10: Brookfield Infrastructure Partners L.P (BIP) price:


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• Private Infrastructure fund of funds (FoFs):FoFs is a pension fund that raise capital from investors and invest in publicly listed funds and GPs. In-vestors take decision based on their targets and the asset manager invest based on that. FoFs give the investors the opportunity to invest in several GPs, typically eight to ten GPs per FoF. According to Credit and Suisse, the liquidity of this option is limited based on the fund requirements and fees and the type of GPs the fund invest in. The negative side of this option that FoF managers are specialized in financial and risk- management rather then operation. The following chart simplify the concept of FoFs.

FoFs

Private FundsGPs

Publicly listed funds

Investors

• Direct Investment: Only large institutional investors can chose this option because of the high barrier to entry. By using this option, investors is seeking to have a full or partial ownership of the asset. Investors choose this option to diverse their portfolio and have a steady and predicted cash flows. Most of the assets of di-rect investment are unlisted or private assets own by the government or by another investor. This type of project called unlisted infrastructure assets. By using this option, investors have two options; either lending (debt) or buy equity. RARE infrastructure produce the following chart to show us the break-down of the global infrastructure assets. Bellow that chart is RARE 200 universe that shows the weightings across infrastructure sectors around the world for both listed and unlisted infrastructure.


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Display 11:Breakdown of Global Infrastructure Assets

Display 12: RARE 200 universe


Theory in Action6

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Credit Suisse developed a new theory that shows the impact of infrastruc-ture investment on an institutional portfolio. In their study case the study the impact of two different type of infrastructure allocation. the first type is investing in publicly listed infrastructure worldwide. The second type is a customize mix of private infrastructure from three sectors; airports, ports, and energy.

• First type: Credit Suisse chose Macquarie Global Infrastructure Total Return Index as a proxy for this type. Macquarie index covers a broad publicly listed infra-structure investment worldwide that includes mixed brownfield/ green-field investments.

Display 13: Add infrastructure investment to institutional investor’s portfolio

• Second type: Credit Suisse used a customize mixed of funds to show the impact of pri-vate investments in infrastructure with a growth potential. They used a hy-pothetical equal- weighted investment in three sectors; airports,ports and energy.


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As you can see in Display #, Portfolio A represent an institutional portfolio without infrastructure in-vestment. The portfolio has an allocation of 30% of US-equity and 13% of Non-US equity which made a total allocation of 43% to equity. Moreover, the portfolio has an allocation of 24% to fixed income and alternative , which includes REITs and private equity.

Next step is to create portfolio B and C by adding 2.5% allocation to infrastructure in portfolio B and increase it to 5% in portfolio C. The results are more efficient on Return-per-Unite- of Risk. In portfolio B they decrease the allocation of Non-US equity by 2.5% and add infrastructure investment with the same percentage. That resulted in reducing volatility by 20bps and increase Return- per-Unite from 0.75 to 0.76 without affecting the expected return.

In portfolio C, they increased infrastructure investment to 5% and decrease Non-US equity allocation by another 2.5%. This scenario showed a decrease in volatility by 30bps from the original portfolio and increase in Return-per-Unite-of risk from 0.75, the original portfolio, to 0.77.

In portfolio D, Credit Suisse add the customize portfolio in the portfolio. They allocate 5% to the cus-tomize portfolio and reduced the US-equity allocation to 25%. This had a huge impact in the portfolio:

• Increase Expected return by 30bps from 8.8%, in the original portfolio, to 9.10% in portfolio D.• Reduce volatility by 40 bps form the original portfolio.

We can conclude that Credit Suisse theory had been applied in many firms around the world that in-cludes Macquarie and Credit Suisse. Their theory improves the portfolio’s efficiency as reduces risk without sacrificing potential return.


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Conclusion:

Due to the deficits most of the governments around the world run, infrastructure become a hot topic in the financial world. Most of the governments found that by privatizing their infrastruc-ture assets and regulate them heavily, they would be able to maintain and develop their infra-structure. On the other hand, institutional investors try to find a new investment opportunity to help them reach their target return and protect them from what happened in the global financial crisis in 2008.

infrastructure is the back bone for every economy due to its importance in supporting the de-velopment and stability of those economies. We saw that by 2030 the world will need around $40.8 trillions to maintain and develop the world infrastructure. Both institutional investors and governments will need to work hand on hand to fill out this huge gap of need.

A lot of characteristics made infrastructure investments a unique class that attract many institu-tional investors. Their are 5 main characteristics that made this asset class unique; a long term assets that provide essential services, limited or no competition, predictable and steady cash flows, inflation correlation revenue and low volatility and correlation to the other asset classes. Moreover, infrastructure can play many roles in infrastructure in a portfolio, investors can use infrastructure as an alternative to private equity investment or fixed income even equity, where investors can invest in publicly listed infrastructure.

The main target for institutional investors is to diversify their portfolios. This is one of the rea-sons why infrastructure had been classified as an asset class on it own. The result was a new as-set class that help those investors to diversify their portfolios and a diversify asset class within its own. Investors have the ability to chose the type of the project they are willing to invest in, the geography, and the risk they are willing to take. In same time, investors can choose the way they want to invest in infrastructure though; publicly listed funds, private infrastructure (GPs), private fund of funds, and direct investment.

Lastly, Credit Suisse did a great job in proving to us that infrastructure can diversify an inves-tor’s portfolio and effect its target return positively. The world needs more people to work in in-frastructure investments. Analysts, business school students and investors should realize the huge potential in infrastructure as a career path or an investment opportunity. For myself, I am planning to seek a career path in infrastructure as the asset class get my attention. Infrastructure is a big asset class where I can learn more about many industries and in same time learning about other cultures.


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Appendix: Interview

•Brandon Parter

Type: Email questions Firm: Partners Group (UK)

•What are the types of infrastructure Partners Group invest in? •Brandon: Private type of infrastructure or what we call unlisted in-frastructure.

•How do you raise the capital for those investments specially that infrastruc-ture require high capital to entry?

•We general partner with other investors and some times we invest directly. It is based on the investors and our negotiation terms. It is also important to provide your partner with the right analysis. It is important to estimate the cost and to project your expected return. Sometime it is hard to invest with one investor than other one so it is very important to know your partners.


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Work Citation


1. ALTIUS Associates, Infrastructure as part of global investment portfolio (USA,

2013), June 2014.

2. Brookfield Asset Management, Why infrastructure? The Global Investment The-

sis, (UK, 2013), June 2014.

3. Credit Suisse Asset Management, Can Infrastructure Investing Enhance Portfo-

lio Efficiency? (US, May 2010)

4. Citi Research, UK water. (UK, 3 Sep. 2013, 12 June 2013), June 2014.

5. Edwards, Alyse. “Queensland motorways sells for more then $7b to private con-

sortium.” ABC News, 24 Apl. 2014. Web. 10 June 2014.

6. Infra-news.com Deals Data Base

7. PEI alternative insight, Infrastructure investors (USA, 2013)

8. RARE, RARE Gauid to Listed Vs. Unlisted Infrastructure, (Canada, 2012)

9. UBS, An Introduction to Infrastructure as an Asset Class (US)

Documents

What is Infrastructure?