Economists speak of the twospeed  global recovery in which  the sluggish growth of debtheavy  advanced economies is  outpaced by the emerging world.  This state of play is paralleled  in the global infrastructure  universe, writes MIRANDA  WARD.

Global infrastructure  investors have two major  opportunity sets before  them.  In contrast to the mature,  tested infrastructure assets offered  by Europe, China and India host  early-stage developments which,  despite bullish growth projections,  can require years of groundwork  to understand the level and  consistency of returns they can  generate.  It also takes some time to forge  the right industry and regulatory  relationships. For AMP Capital  Investors, this process has taken  10 years. Its Giants Infrastructure  Fund (AGIF) has taken its first  step into the Chinese infrastructure  market almost a decade since the  manager established a presence in  Beijing.  Drawing on relationships  with industry participants and  regulators that it has formed, AGIF  purchased a 19 per cent equity  stake in Quijing Gas, “a listed,  well-respected player in the sector,”  according to AMP Capital’s global  head of infrastructure and private  debt, Phil Garling.

AMP Capital usually targets  infrastructure assets with some  form of established cashflow  or track record, and AGIF was  specifically set up to capture  opportunities in the high-growth  markets of India and China. It also  has the flexibility to invest in other  Asian countries.  But investment opportunities  in emerging markets are not even  a consideration for Access Capital  Advisors, which focuses primarily  on mature economies to find longterm,  low-risk infrastructure with  stable cashflows and monopoly  characteristics, says Access’ head of  infrastructure group Australasia,  Tom Snow.  These assets are usually  within countries that are part of  the Organisation for Economic  Co-operation and Development  (OECD).  “OECD countries have a much  more stable re-entry environment,  and because the infrastructure  is heavily regulated, OECD  [countries] are just more attractive  because the nature of the cashflow  is much more predictable,” Snow  says.

Industry Funds Management  (IFM), which manages about $8  billion in infrastructure assets,  is also less inclined to invest in  the emerging markets of China  and India. Its global head of  infrastructure, Kyle Mangini,  categorises the investment processes  suited to these markets as being  “very, very specific”.  “I think it’s quite important to  have local knowledge and a local  base,” Mangini says. “We wouldn’t  invest in those markets until such  a point where you had a strong  team on the ground and a very,  very strong understanding of the  relevant local parameters.”  IFM’s offshore infrastructure  fund primarily targets the North  America and Europe markets, but  also holds some assets in Brazil and  Chile. It currently has no focus on  the Asia’s developing markets.  One major reason is the  challenges presented by their  regulatory systems.  “Europe generally offers a legal  system that is probably better  understood by Western investors  than [those of ] many countries in  Asia,” Mangini says.