Infrastructure equity has taken pension funds in Canada and Australia by storm in the last 18 months, but it is less well known outside those markets. However, Macquarie's decision to launch a global infrastructure index in conjunction with FTSE this summer, gave notice that it is hoping to change all that. The index launch followed the successful closure of Macquarie's oversubscribed European infrastructure fund, which attracted some j1.5 billion in investor commitments. European institutional investors such as Belgian pension funds KBC and Suez-Tractebel, Germany's HSH Nordbank, ABP of the Netherlands and the British Airways Pension Fund all put money on the table. But such interest, and the increasing number of participants bidding for deal flow, is already beginning to affect returns. Is this just the latest example of a firework asset class?
European pension funds like infrastructure because it is long-term, offers stable cashflows and a very long tail. But they are a long way behind the pioneers of the game – the Canadians and Australians. The Canadians in particular dominate the direct investment sector. Because these public schemes are so huge (the big six range from C$40 billion to C$100 billion in assets) it allows them to hire specialist staff and participate in bids themselves.