Speaking at a Committee for Economic Development of Australia event in Melbourne yesterday, IFM Investors global head of infrastructure debt Robin Miller argued that using infrastructure debt funding for the development of infrastructure will improve the “economic capacity and productivity of the nation”.
“Infrastructure debt is gradually getting prominence as an asset class in Australia,” said Mr Miller.
He said banks now view institutional capital as complimentary not competing, and that some of the well managed assets in Australia are generating strong returns.
“Whilst infrastructure debt is an emerging asset class globally, with very strong interest in the United States and Europe, Australia has pioneered it as an asset class and we are now well placed to leverage that expertise,” he said.
Mr Miller said, however, that the domestic infrastructure debt market was being hindered by the liquidity needs of the super system, a patchy asset supply and a weak relative value imperative.
Allocations to infrastructure debt are also rising much slower in Australia compared to overseas markets.
“In Australia, superannuation’s greater need for overall portfolio liquidity also impacts on the growth of infrastructure debt for institutional investors,” he said.
“Domestically we are also constrained by a patchy deal flow in a small economy relative to the major developed economies.”
Mr Miller also said the value proposition for the asset class overseas is considerably more attractive than Australia at the moment.
“The liquidity needs of our super system need to be looked at holistically before infrastructure debt, along with other alternatives, can truly fulfil its potential for investors or the national interest.”
