IPE RA & Infra Conference: Investors wary of social-assets nationalisation

The potential for institutional investors to be forced out of owning key collective services like utilities and hospitals was one of the topics discussed at the IPE Real Assets & Infrastructure Conference in Brussels this week.

Moderating a panel discussion on the evolution of the infrastructure asset class, François Bergère, executive director of the Long Term Infrastructure Investors Association, asked what can be done to reinforce the case for private-sector investment.

Bergère said that, in recent years, it seemed investors have taken a step back from owning collective-services infrastructure, particularly in the UK, and it was beginning to look like ownership of these assets might be taken back into collective national ownership.

Social infrastructure assets – which could include some forms of real estate – usually have more government and regulatory interference, as they are likely to have more interactions with the people living in the country or area.

For example, Carillion’s collapse last year raised questions about private finance initiative (PFI) contracts, which support hundreds of UK infrastructure projects. This followed an announcement by the government that it will not be engaging in any new PFI contracts.

The opposition Labour government plans to go even further by taking back control of existing projects, a political move that could further deter investors from the UK.

Ted Jennings, investment director at RPMI Railpen, one of Britain’s largest pension schemes, said the pension fund is geared towards more social investment but remains wary of the challenge that the UK government may not want social assets in the hands of a private investor.

To help safeguard against rising public animosity towards private ownership of social infrastructure, Jennings said RPMI Railpen had been considering “advertising the benefits of what we are trying to achieve”.

“We are not trying to make a quick buck,” he said. “We are here for the long term.”

Jennings said the £28bn (€32bn) pension fund wants to invest both in the interest of its members and “the economy as a whole”, but “what we can’t control is what other investors are doing”.

There is a need to work with the government to understand what the parties involved can do to make social infrastructure investment more responsible, he added.

Panel members Pauline Fiastre, investment director, infrastructure debt at BNP Paribas Asset Management and Matt Bushby, the head of global distribution at RARE Infrastructure, both had similar views.

Fiastre said investors should make the public know that investing in these social assets is “not to make exceptional returns but just to provide a study long-term cash flow for the investors”.

Bushby said investors are continually asking for environmental, social and corporate governance (ESG) investments. “Clients have become more demanding asking questions on ESG actions,” he said.

The panel also touched on topics including how mature infrastructure has become compared with other asset classes.

Fiastre said infrastructure equity and debt could be traced back to the mid-1980s and 1990s, when it was designed to optimise risk aversion and help raise long-term finance.

Fiastre said infrastructure equity and infrastructure debt have shown resilience and has matured enough that investors should not be afraid to invest today.

Jennings said he expected infrastructure to evolve, adding that as a result “we engage in stakeholders to see how things can be done better” by working around situations and finding solutions.

Jennings remains optimistic and believes RPMI would increase its weighting to infrastructure in the long term.

“We want that long term cash flow generation and no other asset class provides that so we will continue to invest and increase allocation over time.”

Bushby said RARE, which specialises in global listed infrastructure, has seen a change in how investors use listed infrastructure in their portfolio for diversification.

The change he said involves seeing more investors adding listed infrastructure to their portfolios.

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  • IPE RA conference panel on Evolution of the Infrastructure Asset

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