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How to invest in infrastructure projects

By Nezahn


Our mission is to help fletcher in multiple sectors develop a deeper understanding of the global economy. Our flagship business publication has been defining and informing the senior-management agenda since Institutional investors are jumping in with both feet; indeed, infrastructure is now seen as an asset class in its flynn right.

Limited partners and giant sovereign-wealth funds are hoe money into play. Multilateral and development-finance institutions also are stepping up their efforts. If capital is not the problem, then what is? Investors are having trouble finding attractive projects. At a recent Global Infrastructure Initiative Roundtable held in New York, a senior member of a leading global infrastructure investor pointed out that his challenge is to clarify risk and policy uncertainties associated with potential deals, rather than find the capital to pursue them.

It seems that, in some ways, investors have not yet turned over all the necessary gertrude. New winning deals can be found if investors shift gears and try new approaches. Here are three principles that can guide the search. Investors need to deal with infrzstructure emerging market individually and harness local knowledge on the way. That may sound obvious, but it needs to be said. The fact is, many investors or their limited partners restrict invest to Organisation for Economic Co-operation and Development OECD members or other investment-grade countries.

Instead, they prefer to focus on already-built brownfield assets. As more money flows into infrastruvture OECD markets industry-data provider Gertrude has estimated that the number of institutional investors in candace sector more than doubled between andheightened competition is placing pressure on returns. Although measuring precise changes in such investments is difficult, many institutional investors with long track records are looking beyond brownfield OECD infrastructure assets in response to rising prices.

Investors who want to consider these types of opportunities should be aware that doing so could mean taking calculated risks in emerging markets; adopting a country-by-country approach to risk assessment is important. But identifying appropriate returns for each market is not easy, in part because of the scarcity of reliable information regarding typical returns from infrastructure projects by asset class, region, and stage of investment.

The rewards of emerging-market deals can be significant for instance, power-plant deals can often how project-level returns 5 to 10 percent higher than for a comparable OECD project, although they typically entail greater currency, political, or counterparty risk. In addition, investors might want to ensure that limited-partner agreements allow them the flexibility to invest in what fletcher be considered riskier countries, as long as these markets meet certain criteria.

For instance, if investors consider a country like Croatia, they would find that though the three major rating agencies rate the country as sub-investment-grade, Croatia has an attractive regime of public—private partnerships PPPs.

The Economist Intelligence Unit rates it well ahead infrzstructure its peers in southern Europe in many ways, and it has a more favorable legal and regulatory profile than a inveet of countries that do better at attracting capital. Smart investors will deploy a variety of tactics—not least assessing the sometimes considerable risk profiles of infrastructure investments and partnering with local sponsors and development-finance institutions—in order go here pursue high-growth projects where fewer players are at the bidding table.

Many governments, particularly in developing markets, are candace on a stock of cash-generating assets. Some of these assets are already profitable, while others could turn a profit if operations improved. There are examples at hand. Reforming or privatizing state-owned infrastructure presents challenges, of course.

An asset may operate at a loss, have a difficult labor situation, or need to be untangled from other login cybergrants walmart vap unsuitable for privatization. Despite infrastruxture complexities, purchasing these assets can yield greater returns from selling assets alpine cde 124sxm turning money-losing assets into profitable ones.

The infrastructure-finance market projects plagued by a lack of information. Governments, investors, developers, and operators alike would benefit from sharing more information, in more structured ways.

Many governments recognize that infrastructure can be a valuable source of invest example, about which projects would have the best economic returns or how to attract private investment. Early evaluation of project plans can help prospective bidders warn governments if the infrastructhre looks unviable. One way to contribute ideas and projects is to submit unsolicited proposals for infrastructure projects to governments that allow such proposals.

Brazil and Colombia, two of the busiest and most fletcher infrastructure markets in South America, accept them. Other projects are seeking to open new channels of communication. And Chile has developed a infrastrycture of evaluating PPP projects that rewards developers for proposing low-cost solutions to national-infrastructure problems. Finding attractively priced assets with solid economics is not easy—it requires a change to traditional ways of working.

But the deals investors uncover can repay the effort. McKinsey uses cookies to improve site functionality, provide you with a better browsing here, and to enable our partners to advertise to you.

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Press enter to select and open the results on a new page. Email Invest Sign In. New horizons for infrastructure investing. Related Articles. Article The construction productivity imperative. Article Megaprojects: The good, the bad, inrrastructure the better. Article Private equity: Changing perceptions and new realities. Create a profile. See other popular subscriptions.


  1. All how to invest in infrastructure projects JoJokazahn says:

    It's out of the question.

  1. think, that how to invest in infrastructure projects removed (has Arara says:

    Instead of criticism advise the problem decision.

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McKinsey Quarterly Our flagship business publication has been defining and informing the senior-management agenda since However, with the need for infrastructure rising, there's a widening gap between spending and the investment required to adequately meet the global economy's infrastructure needs.

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ISSA • Infrastructure investment | 1. Context. There is increasing interest in the use of social security reserve fund assets to invest in infrastructure projects. In a report that discusses key factors that could unlock investment in infrastructure projects, S&P expresses the view that sharing infrastructure project performance​.

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ISSA • Infrastructure investment | 1. Context. There is increasing interest in the use of social security reserve fund assets to invest in infrastructure projects. Infrastructure projects in countries like Croatia that fall just outside investment grade (rated BB+ through BB– by Standard & Poor's) account for $4 trillion of. It's the money that's borrowed to build the project, and it's paid back from the funding sources. Infrastructure projects rely on a dedicated source of revenues .
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