Social Infrastructure Finance and Institutional Investors. A Global Perspective

Social infrastructure has endured a long period of neglect in most developed and emerging countries, with chronic underinvestment exposed by the coronavirus crisis 2020. Private sector investment in social infrastructure has widely fallen back over the last decade - this in contrast to economic infrastructure. One of the outcomes of the last global (financial) crisis 2007/08 was a slow revival of economic infrastructure policies, and a growing involvement of institutional investors. This is the first, more systematic account of social infrastructure investment from an international perspective, leading to several key conclusions. The public sector will remain the dominant funding and financing source. Nonetheless, much more private capital could flow with greater clarity on social assets and projects, given their very diverse specific characteristics. There are various investment strategies that can realistically be improved and expanded. Sustainability, impact and SDG investing open a new door for asset owners

Infrastructure as an asset class

Infrastructure as a new asset class is said to have several distinct and attractive investment characteristics. This article reviews concepts, market developments and empirical evidence on the rist-return and cash flows profile, and the potential for diversification and inflation protection in investor portfolios. Furthermore, a new, global analysis of the historical performance of infrastructure funds is undertaken. There is no proper financial theory to back the proposition of infrastructure as a separate asset class. Infrastructure assets are very heterogeneous, and empirical evidence suggests an alternative proposition that treats infrastructure simply as a sub-asset class, or particular sectors, within the conventional financing vehicule on which it comes (e.g. listed and private equity, bonds).Infrastructure investment; Infrastructure fund; Alternative asset; Real asset; Asset allocation; Performance analysis

Social infrastructure investment: private finance and institutional investors

Investment in infrastructure is important to the society and the economy. The focus of the current debates is primarily on economic infrastructure, especially on transport and energy networks. In contrast, investment in social sectors, such as education and health, has so far received surprisingly little attention. This should change. This short paper makes observations and comments on the role of private finance and the activity of institutional investor in this field. It highlights the specific investment characteristics of social infrastructure, and the barriers for more investment. There is much room for higher private participation in social infrastructure investment

Social infrastructure investment: private finance and institutional investors

Investment in infrastructure is important to the society and the economy. The focus of the current debates is primarily on economic infrastructure, especially on transport and energy networks. In contrast, investment in social sectors, such as education and health, has so far received surprisingly little attention. This should change. This short paper makes observations and comments on the role of private finance and the activity of institutional investor in this field. It highlights the specific investment characteristics of social infrastructure, and the barriers for more investment. There is much room for higher private participation in social infrastructure investment

UK Infrastructure Investment and Finance from a European and Global Perspective

This study provides an overview of UK infrastructure investment and finance in an international context, yielding interesting facts and insights for both investors and policy makers worldwide. The UK is one of the leading countries in terms of private sector involvement in infrastructure, with several decades’ experience in regulating privatized utilities and in developing public-private partnerships (PPP). It has attracted substantial European and global capital, and London is a major market place for the infrastructure and green business. However, the UK has also seen decades of weak spending by the state (and taxpayers) on infrastructure. The country needs more investment when public budgets are already stretched. The question is whether private capital will be so easily available in future, especially from institutional and foreign investors

Institutional Investment in Infrastructure in Emerging Markets and Developing Economies

This study discusses the role of institutional investors in financing infrastructure in emerging markets and developing economies (EMDEs). It analyzes the present level of involvement as well as the future investment potential of new financing sources such as public and private pension funds, insurance companies, and sovereign wealth funds. Current investment volumes are still low, but interesting, practical examples can be found in a range of countries and projects. International and domestic investors apply a variety of investment approaches in developing countries, using different equity, debt and fund instruments. This overview can yield some lessons for policy makers and investors. There are (more or less) favorable pre-conditions for successful private-investor involvement, and different models work in different situations, depending on the development stage and the institutional environment. Four types of “leadership models” are therefore described for international and/or domestic investors seeking to spearhead infrastructure investment in EMDEs

Institutional Investment in Infrastructure in Emerging Markets and Developing Economies

This study discusses the role of institutional investors in financing infrastructure in emerging markets and developing economies (EMDEs). It analyzes the present level of involvement as well as the future investment potential of new financing sources such as public and private pension funds, insurance companies, and sovereign wealth funds. Current investment volumes are still low, but interesting, practical examples can be found in a range of countries and projects. International and domestic investors apply a variety of investment approaches in developing countries, using different equity, debt and fund instruments. This overview can yield some lessons for policy makers and investors. There are (more or less) favorable pre-conditions for successful private-investor involvement, and different models work in different situations, depending on the development stage and the institutional environment. Four types of “leadership models” are therefore described for international and/or domestic investors seeking to spearhead infrastructure investment in EMDEs

A Soft Budget Constraint Explanation for the Venture Capital Cycle

We explore why venture capital funds limit the amount of capital they raise and do not reinvest the proceeds. This structure is puzzling because it leads to a succession of several funds financing each new venture which multiplies the well known agency problems. We argue that an inside investor cannot provide a hard budget constraint while a less well informed outsider can. Therefore, the venture capitalist delegates the continuation decision to the outsider by ex ante restricting the amount of capital he has under management. The soft budget constraint problem becomes the more important the higher the entrepreneur’s private benefits are and the higher the probability of failure of a project is