“We’re not in the widget business, but someone else might be. We have the capital, and an understanding of business, but not enough to run it.” By investing directly in infrastructure, pension funds can save about 10 per cent of the gross return that would otherwise be forfeited if they entered an infrastructure fund, de Bever says. The model for direct pension fund investment in large unlisted assets is evolving, and pension funds now often outnumber funds managers among the consortiums that bid for large assets.

An example of this is the group of investors which in February purchased all the common stock of US natural gas company, Puget Energy, for US$7.4 billion. The investors, which formed Puget Holdings to affect the transaction, comprised Macquarie Group, the Canadian Pension Plan Investment Board, British Columbia Investment Management Corporation and AIMCo. “There is a role for infrastructure managers to provide expertise and analysis. You can see the model evolving,” de Bever says.

More recently, AIMCo has discussed co-investing with pension funds to access absolute return managers and negotiate lower fees. In the infrastructure sector, however, the opportunities coming on stream now are not often priced to reflect the global economic downturn and still demand 2007-08 costs, de Bever says. But roads, airports, energy and water infrastructure still need to be built and maintained.

De Bever thinks the deals on offer today
are too expensive compared to when he first began investing in the market a
decade ago, when it was less efficient and good opportunities arose more
frequently. The pricing of all alternative assets, and fees paid to managers,
will be debated for some time as many investors re-examine what they have
bought, and their reasons for investing in the sector. “One or two years ago
everybody was enamoured with alternatives,” de Bever says. “People forgot that
it’s not the asset that you should be attracted to, but what the asset

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