OVERVIEW

In the UK we have some of the oldest infrastructure in the world. There is a pressing requirement to modernise, replace and update our existing infrastructure. There is also a variety of assets that can be broadly defined as either economic or social. Economic infrastructure includes utilities, transport systems, communication networks and renewable energy. Social Infrastructure assets include public buildings such as schools, prisons and hospitals. A RREEF¹ report estimated the value of European economic infrastructure to be €4-5trillion, social infrastructure was thought to be €420bn. Return expectations for infrastructure over 10 years are an annualised 9.5%; this is only second to private equity (11.3%) and compares favourably with returns of stocks (9.0%), bonds (5.1%) and cash (3.7%).² Investment in improving UK infrastructure will need a huge amount of capital over the coming decades, particularly when factoring in the effects of climate change, and the government see it as a key aspect in stimulating economic growth.

For pension fund investors, with long-term liability of pension plans, infrastructure is an asset with plenty of clear benefits and one that has the potential to offer new sources of return. It is an asset class that has the capacity to match long-term pension assets, generate yield, is often inflation-linked and has the variety to provide better diversification of investment risk. Projects produce tangible assets, rather than complex investment strategies, and often provide public goods that are essential to society. Assets provide stable and predictable cash flows offering long-term cash flows and returns that are insensitive to the fluctuations in stock markets, interest or business rates. Default rates are relatively low and low correlations with other asset classes offer good diversification potential.

At face value the attractions of investing in infrastructure seem abundant. A tangible long-term project that generates cash, it may be an asset that can provide a steady return, perhaps through customers paying to use road tolls or transport companies paying for new stretches of rail, runways or new ports. However, there have been problems in the past, investors have since gained awareness of pricing and leverage issues, and it is essential for investors to understand the risks of infrastructure assets. At the conference, we will be exploring construction and operational risk, potential legal and ownership issues, regulatory and political risks, and also how changes in the business landscape could affect assets. What types of projects should be considered, which are the most risky and which are the most likely to generate yield? What specific advisors are needed when entering a primary or secondary market?

Join us at Pensions: Infrastructure Investment where our programme of expert speakers will discuss the potential of the infrastructure asset class to deliver stable cash flows and long-term income streams. The agenda will explore which type of investment and infrastructure project best suits the needs of institutional investors. Delegates will gain a strong understanding of infrastructure markets, the potential for returns and how to mitigate against risks.

¹ RREEF (2006) European Infrastructure Market, RREEF Research
² Survey of 100 European pension schemes undertaken by Richard Davies Investor Relations for Financial News (2007)