Government Agencies Investing in Infrastructure – October 2013

by Julia Goodall

  • 08 Oct 2013
  • INF

Government agencies are often established for specific developmental purposes meaning infrastructure can be an important aspect of their investment portfolios. Preqin is currently tracking over 60 government agencies that are active in the infrastructure asset class. The largest of these is Caisse des Dépôts et Consignations (CDC), a French government agency which has assets under management in excess of €260bn. CDC invests in unlisted infrastructure funds, and also has a separate arm, CDC Infrastructure, which is dedicated to direct infrastructure investment. Another notable government agency investing in infrastructure is the Mexican Fondo Nacional de Infraestructura, which has its entire MXN 270bn ($20.5bn) portfolio committed to infrastructure investments. The government agency invests via unlisted vehicles and direct strategies and focuses solely on domestic Mexican infrastructure development.

A large proportion of government agencies investing in infrastructure are located in West Europe, with 33% located in the region. A further 13% of active government agencies are located in both North America and the Far East. The developmental aims of many government agencies mean that investments are often focused domestically, with smaller allocations sometimes being set aside for international investments. For example, CDC Infrastructure will invest 80% of its capital in France and 20% in the wider EU and OECD. On the other hand, some government agencies are set up with the aim of promoting development in emerging market economies. Germany-based DEG is an example of one such organisation. Its 18% infrastructure portfolio includes interests in Africa, Asia, Europe and Latin America. The government agency has an annual target of €300mn for infrastructure investment, and will invest through unlisted funds or directly into assets.

The developmental aims of these organisations can also be seen in the project stages at which they invest: 93% of government agencies active in infrastructure will invest in greenfield projects and 80% will invest at the brownfield stage. Sixty-two percent will consider secondary stage investments. In terms of investment strategies, both direct investments and unlisted fund commitments are commonly utilized methods of investment by government agencies. Sixty-seven percent of such agencies will invest directly, and 70% will invest through private infrastructure funds.

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