New Equities for Infrastructure Investment
Though infrastructure projects are among the most productive investments a society can make, existing asset classes fail to provide the structure needed to compete with traditional equity or debt. That is why economies would benefit from a new asset class that could harness the potential of private money for public infrastructure.
SINGAPORE – Infrastructure projects can be among the most productive investments a society can make, with clear links to a country's economic growth. For private investors, however, the situation is more complicated. Infrastructure projects can offer reliable – if lower-than-average – returns. But existing asset classes all too often fail to provide the structure needed for these projects to compete with traditional equity or debt.
At the World Economic Forum's annual meeting in Davos, Switzerland, in January, Walter Kielholz, Chairman of Swiss Re, and former British Prime Minister Gordon Brown advocated for the creation of a new asset class for infrastructure – as we have done previously, as well. So how, exactly, can the world harness the potential of private money for infrastructure?
The size of the pie is huge, and so are the opportunities for private investors. The pipeline for infrastructure projects in emerging markets is estimated to have surpassed $1 trillion – $150 billion of which is expected to be raised from private sources. In mature markets, infrastructure investment is projected to reach $4 trillion by 2017.