GLOBAL - Asian pension funds are taking over from their European counterparts as major investors in infrastructure debt, according to AMP Capital's head of infrastructure debt Andrew Jones.
Speaking as he announced the final closing of AMP Capital's €400m infrastructure subordinated debt fund, Jones said when the fund launched in 2010 he had anticipated
European pension schemes would make up the biggest investor base.
Instead the fund, which has attracted capital from 30 institutional investors, has seen a significantly increased interest from Asian pension funds.
"We'd anticipated that the majority of investors would come from European markets, but, in fact, the majority of investors came from Asia, not least because there's greater liquidity in the Japanese and Chinese markets," he said.
"That trend will continue to grow, especially in Japan, where there is great excitement over infrastructure as an asset class.
"Historically, Japanese pension funds have been conservative investors, but they're facing the same pressures as pension funds elsewhere in the world. They need to bridge that gap.
"Infrastructure debt is and feels like a conservative investment, so it seems to be the way to look for additional returns."
Deployment of the capital is on target to date, with just under €170m already invested in five projects.
The fund recently acquired £15m (€19m) of the BAA Toggle debt facility after arranging a £150m subordinated debt tranche for BAA.
However, with a dearth of recent primary transactions, Jones said the fund had instead exploited opportunities in the secondary and refinancing market.
"You need to be connected into the owners to negotiate direct sales, but one of the biggest risks in the secondary market is that you don't have the same ability to refresh your financial analysis of the business, so we only look at businesses we already know," he said.
"When we took on subordinated BAA debt, we'd already been lending to the company for six or seven years."