Superannuation funds with experience and skills in managing real assets stand a good chance of winning bids for UK infrastructure over investors with higher bids, a British trade envoy has said on a visit to Australia and New Zealand.
Justine Allan, head of institutional investor relations at UK Trade and Investment, who recently met with leading super funds, sovereign wealth funds and infrastructure managers – and who is witnessing a growing appetite for riskier assets among large Australian investors – is helping to match global investors to the wide range of available investment opportunities available in the UK.
“The richest bid is not always the successful bid,” she said. “For offshore wind management and construction sophistication is needed. If there is choice, the project developers will choose their investors, they are looking for knowledge transfer.”
Her remarks were made in the context of concerns raised by Frontier Advisors of a bubble in infrastructure prices caused by growing global demand and Allan too confirmed she is seeing greater interest from sovereign wealth funds outside of Australia for UK infrastructure.
Currently 40 per cent of opportunities in the UK are in energy projects, particularly offshore wind, where investors typically buy into the power lines and transmission stations, rather than turbines.
Allan identified Germany, Canada, the UK and Australia as being the countries which were most attractive to global investors. All have a strong rule of law, she said, a low risk of assets being nationalised, as occurred in Argentina 2012-13, and where foreign investors were protected by regulators who were independent of government.
On her recent trip, Allan said she was seeing a growing appetite from Australian investors for assets that involved some development as well as completed assets and a demand generally for larger projects.
“Investors are building up internal teams and they are looking for bigger projects. It costs just as much for them to manage $50 million as it does for $500 million.”
Allan’s trip follows widespread concern from Australian investors about the actions of the British water regulator, Ofwat, to restrict the amount paid by water companies to shareholders. The regulator has made plain its intentions to hit shareholder profits after widespread public anger in the UK over the way the prices of energy and water have outstripped inflation since the GFC, but pay rises have not kept pace with inflation.