- Infrastructure debt funds are attractive investments for institutional investors for some years now. The great news is that its demand is still on the rise and the momentum is likely to stay for quite some time. This has given enough encouragement to the money managers of infrastructure debt funds to reap the benefits of the boom. The infrastructure debt fund companies and its money managers are tightening their belts, preparing for the great leap that can change their fortunes in a way like never before. The debt upswing has encouraged the debt fund companies so much that they are in the process of augmenting their resources and manpower so that they can make hay while the sun shines.
- The story is the same for all investment funds as newer entrants as well as seasoned campaigners of infrastructure debts gear up to lap up big money that is on its way.
Going by numbersThere is enough reason to justify the optimism of money managers and numbers would reveal it all. In the year 2014 infrastructure debt funds raised $4.5 billion. The next year, the collections were stunningly increased by more than double as it recorded a massive figure of $11.5 billion. Seen in the context of estimated annual deficit of $500 billion between the need for funds and funds that are available, it makes complete sense for money managers to hope to make big money in days to come. With 65% to 90% project funding coming from infrastructure debts, the future holds just too much for investors and money managers. Going by the trend, till mid May 2016, $1.6 billion has been raise by 2 funds and another $21.2 billion is on target for another 27 funds. Taken together, there is likely to be three-fold rise over the figures of the previous year.
The story so farIt is during the past two to three years that infrastructure debt funds have attracted the attention of asset management companies. However, the trend of popularity of the funds started growing since the time of the global economic crisis about eight years ago. As a fall out of the crisis that ushered in low interest regime and a slew of restrictive measures on banks’ lending, there was short supply of funds for infrastructure projects. Private institutions were quick to fill the gap and soon managers of alternative investments started funding infrastructure projects. Soon the trend caught on the fancy of investors, who started rushing for the reliable investment route in the long term that is capable of taking care of the impact of inflation.
- The inflation hedging aspect of investing in infrastructure debts seems to be most attractive for investors. The concern of interest rates moving up, investors are more concerned about holding on to the investments and this can be achieved through infrastructure debt funds conveniently.
- The money managers have read the signals right and they deserve to get their share of fortune, but how much is actually achieved is what one can keep on watching for.