Our approach to infrastructure debt

Our breadth of lending, origination capabilities and deep market relationships allow us to offer a range of senior debt investments. These are investment-grade and sub-investment-grade infrastructure projects across the UK, EEA and Canada in fixed-rate, floating-rate and inflation-linked formats. As one of the largest originators of infrastructure debt in Europe (Source: Inframation, July 2023), we have the scale and relationships to source attractive deals the broader market may not see.

Our investment philosophy is focused on managing the downside, given the asymmetric risk profile of debt investing. As such, we lend against core, essential assets with asset security. We place high value on financial covenants, and avoid highly subordinated debt positions. We take the view persistent excess returns come via excellent deal sourcing, not extra risk, and therefore avoid the higher risk parts of the credit spectrum. We also embrace newer sectors and structures that may offer ‘complexity’ or ‘novelty’ premia.

Environmental, social and governance considerations – though non-binding – are integrated into our investment decisions and project monitoring. A rigorous investment process allows us to leverage our team’s extensive experience, prioritising senior debt in carefully structured transactions. Since we began investing in infrastructure debt in 1998, we have never had a payment default (as of 30 September 2023).

 

Potential benefits of infrastructure debt

Infrastructure debt investments have a low correlation to market cycles, matching long-dated assets and providing predictable income streams.

Robust cash flow profiles

This long-term debt is ideal to match long-dated liabilities and can provide predictable income from project cash flows.

Low default risk

Senior debt is prioritised in carefully structured transactions. We have had no payment defaults on our infrastructure as of 30 September 2023.

Diversification

Private infrastructure debt has a low correlation to listed corporate bonds and is more resilient to market and credit cycles. This allows investors to access different sectors and types of revenue.

Illiquidity premium

Infrastructure debt typically delivers an illiquidity premium over listed credit.

Favourable solvency capital treatment

For insurers, the asset class receives favourable treatment under Solvency II, and other regulators are considering similar measures.

Key risks of infrastructure debt

Investment risk

The value of an investment and any income from it can go down as well as up and can fluctuate in response to changes in currency and exchange rates. Investors may not get back the original amount invested.

Illiquidity risk

Where funds are invested in infrastructure, investors may not be able to redeem when they want because infrastructure assets may not always be readily saleable. If this is the case, we may defer a redemption request.

Valuation risk

Certain assets could, by nature, be hard to value or to sell at a desired time or at a price considered to be fair (especially in large quantities), and as a result their prices could be very volatile.

Regulatory shifts

The frameworks for managing essential infrastructure services can change.

Infrastructure debt team

  • Darryl Murphy

    Managing Director, Infrastructure

  • Florent del Picchia

    Head of Euro Infrastructure Debt

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