Infrastructure funds: a primer for wealth managers

Infrastructure funds: a primer for wealth managers

Introduction

This brief answers the question whether these funds should be marketed more heavily by wealth and asset managers.

Scope

*Assesses current infrastructure needs in selected countries, demonstraing increasing demand for privately funded investment

*Discusses Public Private Partnerships in the UK, Ireland and Australia

*Outlines the growth in the number of infrastructure funds in Australia and Europe

*Presents results of Datamonitor's Wealth Management Market Leaders Survey to assess demand from HNWs for these funds in Europe and Asia-Pacific

Highlights

Historically, governments have paid for infrastructure projects through public-financing structures. However, the scale of infrastructure development needed in many countries, combined with government budget deficits, stiff competition for government resources, and reluctance to raise taxes means that there are insufficient resources available.

While an increase in infrastructure funds should be a boon to investors looking for opportunities in this sector, these investments could become the victim of their own success. Pension funds, which are increasing their exposure to infrastructure investments, compete with the funds for the assets.

Although infrastructure funds have less business potential among German and French HNWs than they do in, for example, the UK, they do still hold some potential in those countries. This is why a quarter of German and French wealth managers expect to focus their resources on this asset class.

Reasons to Purchase

*Learn how much business potential Wealth Managers across 8 European countries/regions think infrastructure funds hold for HNW clients

*See the size of Public Private Partnership investment in infrastructure projects in the UK, Australia and Ireland

*Provides Relationship Managers with a top level view of infrastructure funds to assess whether they are a suitable asset class for their clients

DATAMONITOR VIEW 1
CATALYST 1
SUMMARY 1
ANALYSIS 2
Orientation of the brief 2
There is a growing need for investment in infrastructure projects, and new ways to fulfill this need 2
Worldwide investment in infrastructure projects exceeds $1.9 trillion annually 2
Infrastructure funding needs are considerable, particularly in the emerging markets 4
Historically, funding came exclusively from governments, but private funding is increasing, creating a new asset class for private investors 4
More than $68 billion in public/private partnership infrastructure deals worldwide were generated in 2005-6 alone, and the outstanding market exceeds $400 billion 4
The UK has more than $111 billion in public/private partnerships 5
Ireland is among the country leaders in using PPPs to fund infrastructure projects 6
Australia's private infrastructure investment market was boosted by superannuation reforms of the 1980s and 1990s 8
There is an increasing supply of infrastructure funds, but this may not be good for investors 8
Australia is a market leader in the launch of infrastructure funds 8
Today, Europe's investors have at least 44 infrastructure funds to choose from 11
Stiff competition today for infrastructure assets is narrowing the opportunities for profitable investment 13
Infrastructure funds generally are best suited to institutional investors 14
The very long-term nature of infrastructure asset funds means that life companies and pension funds are the most suitable investors 14
There is, however, interest from European HNWs, which wealth managers are focusing on 14
Conclusion 18
APPENDIX 19
Definitions 19
Public Private Partnership (PPP) 19
Private Finance Initiative (PFI) 19
Methodology 19
Further reading 19
1OECD (2006) Infrastructure to 2030. 19
2Risk Australia (2007) Rush for assets. 19
Ask the analyst 19
Datamonitor consulting 19
Disclaimer 20
List of Tables
Table 1: Global annual average infrastructure spending, 2000-2030 3
List of Figures
Figure 1: Telecoms and water infrastructure projects account for three quarters of annual spending, annual average from 2000-2010 3
Figure 2: Europe dominates the PPP infrastructure market, 2007 5
Figure 3: Innisfree is the largest PFI investor in the UK, 2004-7 6
Figure 4: Transport will form Ireland's largest PPP infrastructure sector in 2009-12 7
Figure 5: Listed infrastructure funds have grown dramatically on the ASX 9
Figure 6: Most infrastructure funds for sale in Europe are "equity funds" 12
Figure 7: Investors in Austria, Germany and Luxembourg have the widest range of infrastructure funds available to them 13
Figure 8: Infrastructure funds have a lot of business potential among HNWs in the UK and Nordic region 15
Figure 9: British, French, German and Nordic wealth managers plan to focus resources on infrastructure funds in the next two years 16
Figure 10: Infrastructure funds have the most business potential among Chinese and Taiwanese HNWs 17
Figure 11: Despite strong business potential among HNWs, Taiwanese wealth managers will not be focusing resources on this sector in the next two years 18