GLOBAL - Dutch pension provider PGGM is to invest 20-30% of its infrastructure portfolio in emerging markets.
Henk Huizing, head of infrastructure for the €103bn pension provider, last week toured China on a fact-finding mission to scout assets for the schemes it manages, including the €99bn healthcare scheme PFZW.
"The pension funds we manage are interested in emerging market portfolios," he said. "They asked us to find opportunities in those markets — in Latin America, China and India. They want more diversification in their portfolios and exposure to emerging markets assets, especially in real estate and private equity."
Although the pensions firm has not set a specific target, Huizing said he would balance assets between different emerging markets.
"China will be one of the big ones," he said. "It's a vast market - huge - so there are many more opportunities to invest in ports, rail, toll roads, hydropower and wind energy.
"There are many concrete opportunities. We have insufficient information yet to know where we'll invest."
Yet he played down suggestions that investing in Chinese infrastructure could expose the pension funds to additional political risk.
"Political risk is always there in infrastructure, whether you're investing in emerging or mature markets — look at Spain [after the Spanish government surprised investors by unexpectedly and retrospectively withdrawing subsidies on solar assets].
"You're exposed to that risk in every market - in the Netherlands, in Spain, in China. It may be that China is more unknown, but that doesn't mean political risk doesn't exist elsewhere."
He added: "If you're investing in regulated assets, public authorities are going to be involved. You have to prepare for the unexpected — and not just in developing markets."
Asked about local competition for Chinese infrastructure assets, he said domestic parties were more interested in private equity because of potentially higher risks and returns.
"There isn't enough competition to make it a problem - the pressure up on prices isn't there yet," he said. "There may be pricing pressure in the medium term. We'll have to see. But at this moment, it's still attractive."
