Infrastructure assets are the pillars of a functioning society. The individual sub-sectors have very different attributes, but they all provide us with indispensable services
An asset class that offers many Options for institutional investors
Institutional investors in this asset class benefit from sustainable long-term cash flows. Within infrastructure, institutional investors can invest in a range of sub-segments, each with very different risks and value drivers. Economic and cyclical risks can be incurred deliberately, for example, or avoided entirely, generally at the expense of greater regulatory risk.
Irrespective of the chosen sub-segment, it is essential to define and deliver an appropriate risk/return profile. Within the industry, a distinction is usually made between the following investment strategies:
Possible investment strategies – infrastructure asset class
The main feature of the European infrastructure sector in recent years has been the rapid growth of investment in the renewable energy segment. While private equity and infrastructure investors operate primarily in the development and construction phase and tend to have only a medium-term perspective, other institutional investors are increasingly committing to the very long-term operational phase of a project. A large number of investment opportunities, small to medium-sized projects and a documented track record allow many institutional investors to feel comfortable about investing what is in some cases a significant portion of their funds in renewable energy.
Key features of investment in renewable energy:
- Indispensable services and facilities with monopolistic attributes
- Long-term stable income
- High degree of predictability due to long contracts
- Low correlation with capital markets and high level of resilience during economic downturns
- Protection against inflation