The rise of Infrastructure debt investment management
Debt investment management is an activity that came into prominence post global economic crisis that surfaced in 2008. This was the time when it started to become very difficult to obtain funds for infrastructure projects and the gap between demand and supply of funds started increasing. Banks that used to be the backbone of project financing were strapped by several restrictions that curbed lending to infrastructure. Governments had never been a stable source of finance and funds. Against this backdrop, infrastructure debt funds of private institutions started emerging that provided institutional investors with the much needed conduit for investing directly in infrastructure projects. Today, infrastructure debts are one of the most attractive long term investments for institutional investors and its demand is rising. According to projections available, the annual gap between funds needed and available public funds is around $500 billion and this trend is likely to continue till 2030.
The story of the beginning
With so much money flowing, there is need for efficient management of investments on behalf of investors to ensure that their investment goals are met. Investors have the money, but do not have the professional competence of making the best investment decisions that professional investment managers have. This is the simple reason why investment debt management companies have flourished since the same time that infrastructure debt started attracting public money. Investors have found their mentors in these debt investment management companies.
More gains
The main attraction of investing in infrastructure is reliable returns that can ensure long term cash flow for institutional investors like the pension funds and insurers. This is achieved by investing in core assets that have unique attributes of being difficult to replace or replicate. This is considered a safe zone for investment. But investors need to match and mix their risk taking abilities so that gains can be increased. This can be done by moving away from the safe zone of investment and venturing into diverse asset class like airports, prisons, hospitals and service station. To do this, investors are badly in need of professional guidance from investment managers whom they are associated with.
Investment management is a necessity
Despite huge investment opportunities in infrastructure debt funds, it is not easy for investors to identify the right assets that can help them realise their investment goals. Moreover, allocating funds in different portfolios, spreading investments and switching funds according to market movements to augment profits is something that investors might understand but find difficult to implement. It is the job of investment managers to hold the hands of investors and accompany them in their investment pursuits to fulfil their financial objectives.
It can thus be concurred that with rising demand for infrastructure investment, the demand for managing investments has also increased. Infrastructure debt investment management companies serve the interest of investors and as long as the demand of infrastructure debts remains, the debt investment management companies will also stay relevant for investors. As private capital flows heavily into infrastructure assets, the investment horizon is increasing and this makes investment management companies more relevant to investors.