The big problem with the $120b infrastructure pipeline

That’s a hefty allocation, and included about $7.5 billion out to funds managed by IFM Investors and Morrison & Co at June 30, both of which were big participants in the last big round of privatisations.

Campbell says that 13.5 per cent is slightly ahead of where infrastructure should be per the fund’s strategic asset allocation (13 per cent), and so is probably on the sidelines for a while so far as big new investments are concerned. And where there are big cheques, they seem to be offshore.

The other problem for big super – and also the Canadian pension funds to some extent – is that their infrastructure investments have held up in value, while their listed markets assets (bonds and stocks) have not. That pushes infrastructure allocations higher, whether intended or not.

The other players in those privatisation syndicates were the fund managers, the IFMs of the world, who are also on a bit of a go-slow. The fundraising environment isn’t great and without fundraising, they have few bullets for new deals.

Michael Bessell, co-head of infrastructure for fund manager Dexus (formerly AMP Capital’s infrastructure team), told the conference fundraising was “reasonably tough”.

He says his team has had success with wholesale (retail) clients, who now have fewer infrastructure options in listed markets. Institutional mandates are a bit slower, although he told the conference he had been in the Gulf and US in the past fortnight meeting investors.

So if big super and the fund managers are either on the sidelines or smaller players than they were in the 2010s privatisation spree, who will fill the gap in infrastructure investment?

The government will have to in the near term, which is pretty much always the case for greenfield projects.

It can sell stakes in assets once they are up-and-running or de-risked, as it is trying to do with intermodal terminals run by National Intermodal, but it takes time. [And the intermodal deals are more property in nature than infrastructure].

If it wants infrastructure buyers, it might have to look offshore.

And fortunately, there are plenty of Australians now running or heavily involved in offshore investment groups like Brookfield, Stonepeak Capital and KKR, all of who are underweight Australian infrastructure and seem hungry for more.

Infrastructure investing is an untold Australian export success story. Australian fund managers like Hastings Funds Management, AMP Capital, IFM Investors and Macquarie Asset Management were at the forefront, and plenty of their talent has dispersed into offshore rivals buying mostly assets offshore.

However, they are all attracted to the Australian market, thanks to the steady population and economic growth and regulatory regime, and familiarity with its cities and states thanks to the often Aussies in charge of New York or London-based teams.

Does Australia have the appetite for another round of foreign infrastructure acquisitions? Probably, and particularly if they are from Canada, the UK or the United States. FIRB hasn’t been mentioned as a risk at Origin Energy, for example, where the fierce takeover debate is now all around valuation.

The good thing about capital is that it is portable, as Macquarie Capital’s Tom Butcher said, and that portability stretches to Australia.

“It moves around,” he said. “There are plenty of eyeballs on this market.”