Assumptions challenged

July 8, 2015 admin

A few weeks ago, I was in Toronto for our eighth annual I3 Editorial Advisory Board meeting, where the board discussed the challenges and opportunities in global infrastructure investing for institutional investors.

As usual, the discussions were engrossing, and that is in large part thanks to the broad range of people who sit on the I3 board — geographically, the board comprises members from Europe, the United States, Canada and Australia, and whose mandates take them into all corners of the globe to invest in infrastructure. The board also has perspectives from public and corporate pension plan sponsors, insurance company investors, foundations, sovereign wealth funds, placement agents, investment managers, and investment consultants.

This range of participants makes for insightful discussions, and perhaps one of the most interesting point that I heard was about governments and their interest or disinterest in working with institutional investors to invest in infrastructure.

The point was made during a discussion about the current regulatory environment and whether it was business as usual or something different. Many in the room challenged assumptions about developed and developing markets and which carry the greatest political and regulatory risks.

With the situation in Greece providing a string of unexpected decisions, the discussion was apropos — and perhaps a foreshadowing of some of what is taking place now in global investment markets.

The point one of our board members made was that it seems that more of the governments that have traditionally been open to private investment capital in infrastructure — typically developed, OECD markets — are increasingly not concerned about making decisions that would scare off this investment. For example, these governments are restricting and/or cutting tariff increases much more than investors had expected.

On the other hand, it seemed to this board member, that developing countries — where much of the concern about political and regulatory risk is typically focused — can in some cases be much more willing to make decisions that would satisfy and encourage private investment in infrastructure.

It is interesting and contrarian viewpoints like this that make our annual Editorial Advisory Board meetings insightful and valuable. I will be writing more about the discussions at our board meeting and conference for the upcoming July/August issue of Institutional Investing in Infrastructure, which publishes Aug. 5.

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DrewWebsiteDrew Campbell is senior editor of Institutional Investing in Infrastructure.

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