GLOBAL - Governments will compete to harness private sector infrastructure investment over the next decade, according to a report published by Ernst & Young.
The report claims capital from private-sector investors, including pension funds, could account for up to 15% of global capital pouring into state infrastructure projects.
Stable cashflows made infrastructure "a good match" for pension funds, according to Chris Lawton of E&Y's real estate practice, especially as the credit squeeze takes the heat of out prices driven up by competition among investors.
"Prices will be more realistic," he said.
He also pointed to better awareness among investors of where assets sit on the risk continuum - in contrast to a recent report by Standard & Poor's suggesting considerable opacity.
"The thing about infrastructure is that you can make investments across the risk spectrum, just as you can with any other asset class," said Lawton.
"It's evolving. One thing you see in the market is that, even though it isn't that old, over time people have realised that the political environment is more important than they realised - especially with projects in emerging economies," he added.
Notably, he said, infrastructure investors would increasingly need to demonstrate "they aren't getting a free ride" with assets transferred by governments, often controversially, to the private sector.
"At the same time, governments need to demonstrate the benefits and safeguards of private sector investment," he said.
So far, North American pension funds have been more aggressive than their European counterparts in acquiring infrastructure assets.
A mooted bid by Dutch parties to tap pension funds for infrastructure funds met with a cool response.
Bram van Els, a spokesman for the €21bn PME metalworkers fund, told IPE Real Estate at the time: "Solving the government's financial problems isn't our job. Our role is to generate a return for our investors, not raise funds for the government."