Infrastructure risks losing out to real estate, delegates at a London conference heard today.
Delegates at The Infrastructure Investment Conference for Pension Funds, organised by Stirling Capital, heard how the two sectors offered investors contrasting characteristics.
Infrastructure’s lack of data or benchmarking was a concern, delegates heard – and could lead to wrong investment decisions being made.
On a panel comparing the two real assets sectors moderated by Preqin’s Andrew Moylan, IPD managing director Peter Hobbs said: “Infrastructure is an opaque sector. That’s a recipe for mistakes being made.”
Hobbs said there was a risk that investors would pull back from the infrastructure sector in favour of more “readable” investment opportunities.
“That’s the worry if mistakes are made,” Hobbs said, citing the examples of Japanese and Swedish investors’ collective turn-offs in previous real estate cycles.
The cyclical nature of real estate contrasts highly with the long-term nature of infrastructure, Townsend Group principal Adam Calman said.
“Institutional investors need to take a capital view and not consider short-term yields,” he said.
The concept of “future core” and the high impact cities and mobile technology are having were factors to be taken into consideration, he said.
The pricing of core, brownfield infrastructure was also discussed during the panel, with greenfield assets in less developed markets being brought into play.
On a previous panel on investment policy, GIC Special Investments senior vice-president David Kerr said the characteristics of infrastructure could alter over time and as a portfolio was developed.
For Legal & General corporate affairs director John Godfrey, there is more sense in identifying pockets of opportunity created by infrastructure – rather than the underlying “hard infrastructure in isolation”.
“The eight or nine new rail stations along a new rail line are the sorts of places we’re likely to come in,” Godfrey said, adding that housing in such areas was a sensible investment route.
“There’s been too much discussion about engineering and the journey time.”
Godfrey said L&G was being pushed towards alternative sectors such as senior housing as a consequence of pricing levels in core infrastructure.
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