meeting the needs of institutional infrastructure investors
DESCRIPTION
Saskatoon Regional Growth Summit, Frank HartTRANSCRIPT
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THE
POWER OF
DISCIPLINED INVESTING
Meeting The Needs
of Institutional
Infrastructure
Investors
Nov 21st, 2013
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Topics
1. The Context for Private Investment into
Infrastructure
2. How investing serves the needs of
Institutional Funds
3. Making your infrastructure investment
appealing to institutional investors
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1. Context
Institutional
InvestorNeeds
InfrastructureGap
Infrastructure investment needed:
Global: $41 trillion
North America: $6.5 trillion
Europe: $9.1 trillion
South America: $7.4
trillion
Asia: $15.8 trillion
Global environment:
Low interest rates
High equity market volatility
Inflation concerns
Increased correlation in public
markets
Note: Total projected cumulative infrastructure spending 2005-2030Sources: Booz Allen Hamilton, Global Infrastructure Partners, World Energy Outlook, Organisation of Economic Co-operation and Development (OECD), Boeing, Drewry Shipping Consultants, U.S. Department of Transportation
Match
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Global infrastructure fundraising ~ $160 billion to 2011Source: Probitas Partners’ Infrastructure Institutional Investor Trends Survey for 2012
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PIAC infrastructure ExposureSource: PIAC
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Why infrastructure
Sustainable and low volatility cash flows Combination – cash yielding and capital
appreciation
Low correlation to traditional asset classes
Risk mitigation & lower volatility of returns
Essential and long-life assets Strong asset matching of long duration
liabilities
Potential for inflation-linked returns
Provides portfolio level diversification Sector, geographical and strategy
diversification
Potential for absolute returns in a low interest rate environment
Driven by stable, long-term income producing assets
Stable Cash Flows
LowCorrelation
Long-LifeAssets
InflationProtection
Diversity
Returns
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Canadian infrastructure returnsSource: Greystone with data from OTPP, OMERS, CDPQ AND CPPIB
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Historic returns
Source: S&P, DEX, Mercer, Greystone with data from OTPP, OMERS, CDPQ and CPPIB
Ending December 31, 2011
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Infrastructure asset stagesSource: Adapted from Probitas Partners
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Infrastructure asset
Source: Greystone
Stage of development risk return profiles
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Infrastructure asset
Source: Greystone
Sector-based risk return profiles
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A Few Final Considerations
Success in attracting institutional infrastructure
investors is also influenced by other factors such
as:
1. Deal Size: i.e. $100 million deal size for PPP projects.
2. Deal Characteristics: i.e. leverage, governance
arrangements
3. Other Risks: Counterparty risk, political risk, user demand
risk