Investors have reacted positively to the European Union’s call for greater transparency on infrastructure lending.
Last week, the European Commission threw its support behind a number of proposals to encourage long-term financing by institutions other than banks. The Commission argued that member states should publish infrastructure investment plans and ensure credit information on infrastructure loans is readily available in a central database.
David Cooper, executive director for European debt investments at IFM, welcomed the directive. “It’s absolutely what’s needed in my view. Infrastructure debt is a great asset class but it’s sometimes hard to evidence that statistically.”
More data, Cooper said, would help institutional investors understand the sector’s risk and return profile. From his time in the UK banking sector, Cooper said the exchange of infrastructure loan data had led to greater understanding of the sector’s risk profile among lenders. Produced annually since 1983 by Moody’s, the rating agency’s Default and Recovery Rates for Project Finance Bank Loans sees a consortium of banks pool information on an anonymous basis. The global study reviews data from 4,425 projects, which account for some 54.2% of all project finance transactions originated since 1983.
Cooper believes similar measures for the institutional sector would be advantageous.
More transparency in the infrastructure loan market has previously been raised by German pension association aba, which in January suggested the European Investment Bank should help in assessing projects.
The Commission said it would evaluate the feasibility of “collecting and, where possible, making available comprehensive credit statistics on infrastructure loans and setting up a single-point compilation of project bond issue data”.
Macquarie, which was recently awarded a £200m (€241m) mandate by a UK pension scheme for a new inflation-linked debt fund, said it welcomed any initiative that helps “rid barriers to pension fund investment in infrastructure”.
Andrew Robertson, head of investor structuring and strategy, Macquarie Infrastructure Debt Investment Solutions (MIDIS) said: “These initiatives, focused on transparency and data quality, together with the launch of pooled fund solutions, will be important enablers for the broader participation of pension funds in the infrastructure debt asset class and will ultimately help drive growth across Europe.”
Lazard Asset Management’s Global Listed Infrastructure Fund portfolio manager, Warryn Robertson, said disclosure and transparency across the sector did need improvement.
“Infrastructure is where REITs were 20 years ago – so improvements to disclosure and transparency could be made and it would be good to see more people buying into that”.
