Super fund liquidity impacts infrastructure investment
Infrastructure debt funding should become a key part of developing infrastructure and therefore economic capacity in Australia, according to IFM Investors global head of infrastructure, Robin Miller.
Addressing a Committee for the Economic Development of Australia (CEDA) event this week, Miller warned however that the liquidity needs of the super system — as well as a patchy asset supply and a less compelling relative value imperative — was hindering the domestic infrastructure debt market, compared to overseas.
He said that infrastructure debt was gradually gaining prominence as an asset class in Australia, with banks now viewing institutional capital as complementary not competing, and with some excellent local assets in Australia being managed the right way and delivering strong returns.
"Whilst infrastructure debt is an emerging asset class globally, with very strong interest in the US and Europe, Australia has pioneered it as an asset class and we are now well placed to leverage that expertise," Miller said.
However he cautioned that despite the pioneering work, allocations to infrastructure debt were still rising only slowly in Australia.
"In Australia, superannuation's greater need for overall portfolio liquidity also impacts on the growth of infrastructure debt for institutional investors. Domestically we are also constrained by a patchy deal flow in a small economy relative to the major developed economies," Miller said
He claimed that the liquidity needs of the Australian super system needed to be looked at holistically before infrastructure debt, along with other alternatives, could fulfil their potential for investors or the national interest.
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