LONG TERM INVESTMENT FOR INFRASTRUCTURE DEVELOPMENT ADBI-OECD Roundtable on Capital Market Reform in Asia 13-14 March 2014, Tokyo The views expressed in this presentation are the views of the author and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms. Raffaele Della Croce Lead Manager, LTI Project, Financial Affairs Division - OECD [email protected] Institutional investors Landscape Inst Inv AUM have been growing to USD 83tr AUM in OECD countries Assets held by Institutional Investors in the OECD area, 1995-2012 Source: OECD 2 Pension Funds’ LTI: Survey Oct 2013 Large Pension Funds Survey 2013.. North America Ontario Municipal Employees’ Retirement System (OMERS) - Canada Canada Pension Plan Investment Board (CPPIB) - Canada Ontario Teachers Pension Plan (OTPP) – Canada Social Security Trust Fund –USA Calpers - USA OPERS- USA PRIM -USA Europe Zilverfonds –Belgium ATP – Denmark PFA –Denmark Pension Reserve Fund – France AGIRC-ARRCO –France National Pen Res Fund –Ireland Fonchim –Italy Cometa –Italy ABP -Holland PFZW - Holland PMT - Holland Governmenr Pension Fund Global –Norway Demographic Reserve Fund –Poland Social Security Stabilisation Fund – Portugal BPI – Portugal Social Security Reserve Fund –Spain Caja Madrid –Spain Endesa –Spain Fonditel –Spain Ap1-Ap6 –Sweden University Superann. Scheme (USS) -UK BT Pension Scheme - UK Asia - Australia &NZ Central & South America Sustainability Guarantee Fund –Argentina Banco do Brasil Employee Pension Fund (PREVI) - Brazil Pension Reserve Fund – Chile AFP Provida – Chile AFP Horizonte – Colombia Bancomer Afore – Mexico IMSS Reserve – Mexico AFP Horizonte –Peru Africa Nigeria Government Employees Pension fund of South Africa (GEPF) National Social Security Fund - China Goverment Pension Investment Fund – Japan Pension Fund Association - Japan National Pension fund – Korea AustralianSuper – Australia SunSuper - Australia Future Fund – Australia New Zealand Superannuation Fund – New Zealand ..Investors for more than US$9tr AUM spread 3 across regions Pension funds Asset Allocation Average asset allocation of Large Pension Funds (LPFs) and Public Pension Reserve Funds (PPRFs), 2012 4 Barriers to Infrastructure Investment Problems with government support for infrastructure projects • • • • • Lack of political commitment over the long-term Lack of infrastructure project pipeline Fragmentation of the market among different levels of government Regulatory instability High bidding costs Lack of investor capability • • • • Lack of expertise in the infrastructure sector Problem of scale of pension funds Regulatory barriers Short-termism of investors Problems with investment conditions • Negative perception of the value of infrastructure investments Lack of transparency in the infrastructure sector Mis-alignment of interests between infrastructure funds and pension funds Shortage of data on infrastructure projects • • • Source OECD Different ways to access Infrastructure Source PREQIN 6 Infrastructure Investing Infrastructure as an asset class –Risk Returns Profiles Sources:UBS 7 New Initiatives – Equity Market-led initiatives Co-Investment Platform - Pension Infrastructure Platform (UK) - Infrastructure Investment Platform (PERU) - Global Strategic Investment Alliance - CPPIB and Kindle Capital 407 Toll Road (CANADA) Equity Funds -Meridiam (US,EUROPE) Govern led initiatives Public Seed Capital -Phillippine Investment Alliance for Infrastructure Fund – PINAI (PHILIPPINES) -InfraMed (EMEA) -Industry Fund Management (AUSTRALIA) -Invespar (BRAZIL) -Marguerite Fund (EUROPE) -Pan African Infrastructure Development Fund, PAIDF (AFRICA) 8 New initiatives - Debt • Debt partnership -Co Investment model (i.e. Natixis/Ageas) • Securitization model (i.e. Natixis) • Debt/Credit Funds and Direct lending (i.e. Blackrock, Amundi) 9 OECD LONG TERM INVESTMENT PROJECT 10 OECD LTI Project What does long-term investment mean and why does it matter? • “Patient”,“Engaged”,“Productive” capital • LTI investors/LT assets • NB: Short Term not bad • OECD, APEC, G20 relevance 11 OECD LTI Project - Structure Deliverables Structure: Modules Data Collection on Institutional Investors Data Collection Infrastructure Investment Regulation Policy Analysis Governance Events Emerging Markets Financing OECD added value • • • • Institutional Investors expertise (Committees, IOPS) Data collection national level Other work from OECD Directorates/divisions (ENV, GOV, DEV etc..) Network of stakeholders (i.e. Institutional investors, Asset managers, Universities, Investors Group) 12 OECD LTI Project – 2012-3 Events Feb 2012 LAUNCH APEC – Indonesia August 2013 OECD/ Euromoney Infrastructure financing Summit 29 May 2013 G20/OECD LTI Roundtable Paris 28 May 2013 Launch Event Paris February 2012 Long-Term Investment Project OECD/APG/RiskLab LTI and Regulation Amsterdam Feb 2013 ADB/OECD /ICC Workshop on bankability of PPPs Feb 2013 2013 OECD Forum Paris May 2012 G20/OECD Green Growth Conference Paris May 2012 OECD/IOPS Private Pensions Global Forum Conference – Chile Oct 2012 13 Next Steps • Implementation of High Level Principles: priority areas for 2014 • Analysis of Government and Market Based Instruments and incentives for LTI • OECD LTI project research • Network of Investors www.oecd.org/finance/lti - OECD long-term investment project 14 Appendix OECD & LTI: contributions to G20 • Diagnostic note (February 2013) • High Level Principles of LTI financing by institutional investors (Sep 2013) • Government and market based incentives for LTI (2014) • Survey Report on Pension Funds’ LTI (Oct 2013) • Institutional Investors and green infrastructure investment (DAF Fin/ENV) (Oct 2013) • Recent work on FDI and Clean Energy Infrastructure (DAF Inv) (Oct 2013) 15 Appendix: APEC • APEC and long term/infrastructure investment • APEC/OECD Indonesia Seminar - August 2013 [Supported by the Japanese Government] main topics: – Infrastructure Investment: Challenges and Opportunities for Long Term Investors – The Development of Debt Capital Markets for Infrastructure – Pooling of Resources – Investment vehicles to attract LTI – Infrastructure Investment Data – Availability Collection and New international initiatives APEC/OECD Seminar on Infrastructure Financing 16 Appendix: Trends in Infrastructure OECD Large Pension Funds Survey 2013: what is infrastructure? Name of the fund Country Tot Assets USD million Infrastructure Investment % of total assets Unlisted Equity Listed Equity Fixed Income Total Canada 52,385 15.5 0.0 0.0 15.5 Netherlands 312,257 0.3 n.a. n.a. 0.3 Australia 65,824 4.1 na na 4.1 South Africa 138,572 0.1 n.a. 0.2 0.3 Previ Brasil 88,847 0.0 13.5 n.a. 13.5 AFP Provida Chile 40,474 0.0 0.2 1.4 1.5 Mexico 16,430 0.0 2.1 0.5 2.6 COMETA Italy 7,484 0.0 2.2 1.5 3.7 AFP Horizonte Perú 7,162 0.3 3.0 7.4 10.7 Portugal 3,114 0.0 10.2 10.6 20.0 OMERS ABP Future Fund GEPF Afore Bancomer Banco BPI Source: OECD 17 Appendix: SWFs in Asia Sovereign wealth funds are key players in Asia Source ADB
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