Australia’s infrastructure plans signal opportunity for Western European pension funds

11 Dec 2013

Australia’s significant greenfield infrastructure pipeline and brownfield public asset sales are creating a compelling investment alternative for pension funds in Western Europe seeking stable cashflow and higher yields, according to the Australian Trade and Investment Commission (Austrade).

Low interest rates have stalled yields and hindered returns in the Euro zone, prompting institutional investors there to look beyond their own borders to alternative asset classes offshore, said Austrade’s David Campbell, Consul General and Senior Trade & Investment Commissioner in Frankfurt.

“There is a significant opportunity to attract these investors into Australian infrastructure investments to finance our A$750 billion infrastructure program over the next 10 years,” Mr Campbell said.

Meanwhile, Western Europe’s capital pool is an estimated US$48 trillion, second only to the United States, representing a significant opportunity for Australia to achieve private-sector financing for its roads, rail and other infrastructure projects.

He said Austrade has been assessing the level of interest in Australia’s infrastructure programme from major institutional investors in Western Europe, where Australia’s Macquarie Bank and First State have operations.

“Most of these funds are struggling to meet their future liabilities and are looking for the additional yield offered from alternative assets,” Mr Campbell said.

“Infrastructure is an attractive asset class with long-term, stable cash flows ideally suited to pension funds and insurers,” he said.

Mr Campbell added that infrastructure as an asset class provides a natural hedge to the funds’ long-term liabilities, and noted another factor in Australia’s favour.

“There is lack of suitable investment opportunities in the sector in Europe.”