SYDNEY (BLOOMBERG) - Record low yields and negative interest rates are pushing investors from Japan to China into funding infrastructure projects across the globe to bolster ailing income, according to Australia's biggest listed wealth manager AMP.
Asian pension funds and insurers are ramping up investments in infrastructure debt around the world including mezzanine offerings as they seek to combat waning returns from traditional fixed income assets, said Kerry Ching, managing director for Asia of the company's investment arm, AMP Capital Investors. The number of Asian investors in AMP's infrastructure debt strategies has more than tripled since 2012.
"Because insurance and pension funds have a large chunk of their portfolio in marketable securities and fixed interest which has been extremely volatile for the last couple of years, they're looking for stability," she said in an interview in Hong Kong. "Global infrastructure debt was a very successful strategy and there's stability in the capital value."
Infrastructure spending plans are drawing greater scrutiny worldwide, including a US$1 trillion (S$1.4 trillion) splurge pledged by President Donald Trump to improve roads, airports and bridges across the US. Investors pumped a record US$413 billion into infrastructure investments globally last year, according to data provider Preqin. Managers such as Global Infrastructure Partners and Brookfield Asset Management raised unprecedented amounts of funding for their infrastructure strategies in 2016.
AMP has invested more than US$3 billion in 56 infrastructure debt assets and raised about US$1 billion from investors so far for its third fund in the asset class. The company is "on track" to meet the US$2 billion fundraising targets for its latest infrastructure debt strategy, an AMP spokeswoman said in a March 31 email. Such debt funds at the firm target a 10 per cent yield on investments, according to the email.
The A$165 billion (S$174.66 billion) manager is seeing increasing interest from Taiwanese and South Korean investors, Ching said. Direct and listed real estate investments including commercial properties in Australia are also increasingly popular among Asian investors thirsty for yield, she said.
"Australian economic conditions have held up relatively well compared with Europe," she said. "Australian property offers slightly better yield than some of our properties in Hong Kong or Singapore."