Asian banks have always had a stronghold in the area of providing debt finance in the region’s infrastructure. However, the implementation of BASEL II has opened the door for more institutional investors to access infrastructure debt. In Q1 2014, China took a step in allowing private capital into its market by allowing bids for 80 infrastructure projects. While it is not known if these opportunities will be open to overseas capital, this is a step forward in allowing non-traditional sources access to the Chinese infrastructure market. Similarly, regulations are easing in India with insurance companies now being able to access infrastructure debt via unlisted funds. One of the largest debt funds in the Asian market is IL&FS Infrastructure Debt Fund; investors which have already committed to this vehicle include insurers such as Oriental Insurance Company and New India Assurance Company.
Preqin currently covers 123 Asia-based investors with an interest in infrastructure debt, these institutions make up 45% of the Asian infrastructure investor universe. Collectively, these 123 institutional investors hold $14tn in assets under management, with a combined allocation of $49bn to the infrastructure asset class. A noteworthy 87% of the investor pool gains access to infrastructure via private funds. Fifty-three percent of institutional investors have exposure through direct investments, while 22% invest via listed vehicles.
Banks make up the largest proportion (33%) of the infrastructure debt investor pool. Thirty-two percent of these Asian banks focus exclusively on project financing as part of their general business strategy, while 68% access the infrastructure asset class via direct, listed or unlisted routes. Insurance companies are also important players in the Asian infrastructure debt markets, they make up 24% of the investor pool. Pension schemes constitute 12% of these institutions while government agencies and asset managers each account for 7% of the investor pool in Asia. Corporate investors and investment companies each comprise 4% of institutional investors interested in infrastructure debt.
India-based institutions exhibit the strongest appetite for infrastructure debt investments - they account for 28% of such investors based in Asia. One reason for this is that Indian insurers are mandated to invest in infrastructure bonds issued by the government as a result of India’s infrastructure funding gap. South Korea-based investors comprise 26% of the institutional pool, while Japan-based firms make up 16% of Asian investors interested in infrastructure debt. Eight percent of institutions hail from China while Malaysia- and Philippines-based firms each account for 4% of the investor pool in Asia. Singapore, Kazakhstan, Thailand, Hong Kong, Indonesia, Vietnam, Bhutan and Taiwan comprise the remaining 14% of institutions located in Asia.