Opportunities Opening Up in Infrastructure
Private investment has become vital to the improvement of public infrastructure, and competition for capital has become fierce. The cost to maintain and develop infrastructure is mounting and state and local governments are increasingly reaching out to private investors for funding. A slew of new infrastructure funds have been launched in recent months, according to Project Finance International (PFI). Altogether, these new funds have raised capital commitments topping $100 million.
As more global investors capitalize on opportunities in infrastructure, executive search firm, A.E. Feldman, says demand is growing for qualified professionals. Infrastructure finance jobs are opening up for candidates with backgrounds in investment banking as well as experience in analyzing and executing structured financings. The recruiting firm also notes that the most sought after candidates are those with experience in infrastructure transactions and environmental engineering.
Macquarie Group Ltd. is seeking to raise $18 billion for two funds investing telecommunications, utilities, ports and toll roads, according to the Wall Street Journal. The report states that Macquarie Capital Funds wants to raise $11.7 billion for Macquarie European Infrastructure Fund III and $6 billion for Macquarie Infrastructure Partners II, which would invest in North America.
In the past 15 months, 72 new infrastructure funds have been launched, according to Project Finance International (PFI). Altogether, these new funds have raised ” or are expecting raise” capital commitments in excess of $120 billion.
PFI attributes the surge in infrastructure funds to several contributing factors. First, cash-strapped governments have enacted legislation enabling privatization or public-private partnerships of various forms, creating opportunities for private participation in infrastructure that did not exist just 25 years ago. Moreover, there is a general move among institutional investors away from stocks and bonds and towards alternative investment products, like infrastructure, in a search for higher returns. Pension funds are also beginning to think of infrastructure as a substitute for long duration fixed income and new funds are catering to this demand.
Looking ahead, PFI predicts that in the next decade, there will be trillions of dollars worth of demands for new infrastructure services. One example right here in the U.S. transportation bottlenecks are costing the manufacturing industry nearly $8 billion a year, according to the National Association of Manufacturers (NAM). NAM President & CEO, John Engler is calling on Congress to look at mix of investment sources from all levels of government ” federal and state ” as well as public-private partnerships to address this problem. “The time is now to work together to find a solution to this complex problem,” he says.” ”The U.S. will soon be facing a competitive disadvantage if we don’t develop a national plan to improve the quality of our infrastructure system like our international trading partners.”
Meanwhile, both governments and the private sector are deploying vast amounts of capital to upgrade the emerging world. Over the next decade, the FT reports that Morgan Stanley predicts $21.7 trillion will be spent on infrastructure in the emerging markets, as urbanization creates demand for power, electricity, water and transport networks.
