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Abundant capital in a fragile economy

The 2020 edition of IIF Europe takes place in a delicate economy. The enduring macro backdrop of the last few years - low interest rates, global trade tensions and a fractious political environment – has begun to drag on confidence. Infrastructure investors have also paused for breath. The prospects of both a UK General Election and resolution to Brexit make it hard to predict the approach of a new government on either side of the political divide. Future policy of the Conservative party is largely dependent on the means by which the UK leaves the EU, whilst Labour’s commitment to renationalise railways and utilities makes the investment climate increasingly uncertain. Unsurprisingly, the fervent deal activity of recent years is beginning to show signs of weakness – by September 2019, year-to-date brownfield activity in Europe was €20bn off the pace of the previous year with 10% fewer announced deals, according to our analysis. Yet capital continues to flow into the asset class.

By October, European infrastructure funds had raised in excess of $33bn, already surpassing the annual total from the previous year by 5%. Nine of the ten largest funds closed in 2019 were able to exceed their target size, with Ardian attracting commitments of €6.1bn on a target of €5.5bn and Macquarie hitting a €6bn close on a target of €4.5bn-€5bn. For debt investors, infrastructure lending has become more dynamic as funds deploy LBO-style structures. Activity suggests that debt funds retain their appetite for long tenor and expensive loans. Their resilience in the face of a weaker economic outlook is a topic to be explored at this year’s conference. New pools of capital are also emerging from the pension sector.

Super-sized investment funds from the Nordics to the UK being established to emulate North American counterparts. How will such abundant capital be invested in a weaker European economy? IIF Europe 2020 will seek to provide answers for market participants, as we consider new growth geographies such as the Middle East which are attracting maiden investments on the back of a wave of privatisations; resilient sectors with strong fundamentals such as digital infrastructure; and the different deal strategies of airport operators making platform or single asset plays. We look forward to you joining the debate.

Inframation is the leading provider of real-time actionable intelligence for the infrastructure community. We monitor deal-led, principal investing in the development of new infrastructure assets and the acquisition of operational assets and companies to give you research, analysis, intelligence and data.