Private infrastructure debt investment strategies focus on core infrastructure sectors in developed countries that support the economic and social wellbeing of a region. The assets demonstrate monopolistic or quasi-monopolistic traits and benefit from high barriers to entry. Typically, the assets are supported by direct or indirect government support given their relative importance. Sub-sectors of infrastructure investment activity include economic assets such as airports, ports, roads, rail, power, energy, water and transmission. Investments can also include social infrastructure assets such as social housing, hospitals, courthouses, and universities. Infrastructure investments include projects and companies that own and/or operate assets with economic lives that span over multiple decades. Given the long-lived nature of the asset, infrastructure investments provide global insurance and pension fund investors an opportunity to invest in a stable, long duration sector that effectively matches their long duration liabilities.
Private infrastructure debt strategies generally focus on established, brownfield investments that provide essential public services and benefit from stable and predictable cash flows. Additionally, investments can include attractive greenfield assets where construction risk is mitigated and where revenue projections are based on contracted/regulated cash flows. Infrastructure investments benefit from financial covenants and/or collateral that can help lenders with downside protections at attractive yields relative to similar public corporate peers. Lender protections, coupled with stable cash flow potential and asset essentiality, enable lenders to lend to infrastructure assets for 20, 30, 40 or possibly 50 years.
Investments are typically secured investment-grade opportunities with contracted or regulated entities that have established performance track records and stable projected trends. These assets provide portfolio diversification through investment in assets that are generally not available in the public markets and may provide yield enhancements over corporate bonds.