EUROPE - The advisory arm of ratings agency Feri EuroRating Services is to invite a number of pension schemes to invest in a portfolio of funds made up of low-cost European infrastructure assets.

Those invited to invest in the customised fund-of-funds are likely to be mid-sized pension schemes in Germany - Feri's home market - and Austria. 

Managing director of Feri Institutional Advisors Dirk Soehnholz said: "The large think they can do it all themselves - though they're not always right - and the small ones are too small to have a significant allocation to infrastructure."

The as-yet unsized portfolio - which forecasts an annual return between 8% and 10% - will target deals worth less than €1bn, as they offer less competition, lower prices and more potential buyers at the point of sale. Smaller assets are also easier to finance and manage, said Soehnholz.

The focus will be on small and medium-sized value-added funds in renewable and conventional energy, telecommunications, transport and social infrastructure.

Most of the capital will go into modernising existing facilities, which offer a "distinctively" lower-risk profile than new facilities.

In a note, the firm particularly highlighted distressed investments as a lucrative investment opportunity.

It said many European countries had neglected investments into their infrastructure for a long time, causing a "large investment and modernisation backlog".

Soehnholz will also target European assets because of the potential to avoid currency and regulatory risk. Asked about last year's decision by the Spanish government to retrospectively remove subsidies on some infrastructure assets, Soehnholz replied: "We're not investing in Spain."

He was also sanguine about Germany's repeated attempts to draft regulations for infrastructure investment.

"The long approval process in Germany means there is less competition when you eventually get a project," he said.

Panellists at the Infrastructure Investors Forum 2011 earlier this month identified Spain as one of the two most promising infrastructure markets within Europe over the next year - with optimism predicated on the government having learned lessons from its earlier subsidy gaffe.