There is no doubt, Clarke says, that  many of the promoters of infrastructure  funds in the past were thinking shortterm  returns, for themselves, rather  than long-term returns for their clients.  Super funds are more wary now and  the opportunities may well be greater.  While some fund managers and  investment banks are very bullish about  the asset class, there are some financialfiasco  elephants in the room such as  Sydney’s Lane Cove Tunnel [in receivership  last month], Melbourne’s Connect-  East Motorway and the BrisConnections  float.  Funds are divided about infrastructure  as a prudent investment, with some  – such as Industry Funds Management  – allocating actively while others – such  as FuturePlus – saying it’s overhyped,  overpriced, and overly complex.  Love it or hate it, infrastructure  is the barbecue-stopper when funds’  boards are signing off on allocations.  The asset class has moved to centre  stage since the Rudd Government’s  announcement last April of the A$43  billion National Broadband Network  to be funded by Aussie Infrastructure  Bonds [AIBs] and the Building Australia  Fund.

In fact, it’s so important that  Australia’s future as a social democracy  with full employment depends on  super funds’ compulsory investment in  infrastructure, says academic Dr Tony  Ramsay.  And as if this proposal isn’t red-flag  enough to have the infrastructure bulls  pawing the ground, then there’s Future-  Plus’ phlegmatic Michael Block who  says the entire asset class is a chimera.  Block, who’s the fund’s general manager,  investments, says “there is not an  asset class called infrastructure. There  are only two asset classes in the whole  world: fixed-interest and equities.”  FuturePlus is, overwhelmingly a  defined-benefit fund which, in theory,  should make Block more positive about  infrastructure because it’s touted as  inflation-protected, income-producing,  low-correlation, and high-return.  In reality, Block is sceptical about  infrastructure for defined-contribution  funds. “It’s less likely that a definedcontribution  fund is appropriate to hold  infrastructure because of the way you’re  bench-marked on a short-term basis,”  he says.

“It’s a very hard question to answer  whether infrastructure could ever be  put into a defined-contribution fund  in its current form,” he suggests. Love it  or hate it, the clear message coming out  of funds is that it’s a game for the very,  very, very big boys only – and even they  get it wrong.  Each type of infrastructure has a  different profile and so is a very complex  investment, says Michael Siede, executive  director of investment banking,  Royal Bank of Scotland. “The most  active super funds are those that have  the scale, the size, and the sophistication  to go into the detail of each investment  opportunity,” he says.  “Each investment in is the 10s to  100s of millions of dollars, and has low  liquidity. They’re very long-term investments  with highly complex structures  behind them.

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