Captial markets and the delivery vehicles for international infrastructure investments

Infrastructure enhances economic competitiveness and represents an important source of economic empowerment and revenue. At a global level there is increasing demand for infrastructure and as the demand and supply gap widens, the financing of infrastructure is becoming increasingly more complex. The desire to remain competitive in the global market has seen governments increasingly seeking to expand the role of the private sector in the financing and delivery of quality infrastructure resources. This study focuses on investors' attraction to infrastructure investment and the evolving role of the private sector in delivering infrastructure, bringing into perspective key vehicles in the financing of infrastructure resources across regions, countries and sectors. The uniqueness of the study stems from the timely assessment of the impact of the global financial crisis on infrastructure transactions and performance comparing infrastructure investment returns with other asset classes across global, European and UK markets. The study employs a quantitative research approach drawing time series data from two distinctive databases in order to fully explore infrastructure investments from both transaction based activities within the industry and the comparative performance of the asset class. Capital flows and trends in infrastructure transactions across geographical locations and sectors are examined and time series data used in the analysis of infrastructure returns over a ten year period (2001-2010). This facilitated the analyses of a broad range of listed infrastructure investment return characteristics. The data obtained were employed in the construction of efficient portfolio frontiers computed with the aid of an optimization tool. The study highlights the debt driven nature of greenfield projects offering investors a more attractive route into the infrastructure market. The oil & gas, power, transport and social infrastructure sectors attracted the highest investor funds within the infrastructure investment space. The role of the private sector within the infrastructure industry is evolving, as reflected in the growing acceptance of the PPP model and in the flexibility of options available across geographical markets. The impact of the global financial crisis (GFC) on infrastructure delivery from the transaction and performance perspectives was characterized by declining capital flows, resulting in a dwindling credit profile for the infrastructure markets. The resilience of infrastructure as a unique asset class was demonstrated during the GFC period by the superior performance shown by European generation utilities and UK infrastructure. The study shows that infrastructure plays a significant role within a mixed asset portfolio by enhancing diversification benefits; a unique investment strategy sought by investors to enhance investment performance.