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Reasons Why

Reasons Why
During a period of financial repression, where many investors are seeing their traditional fixed income assets delivering negative real yields, real infrastructure assets offer an attractive alternative. As a result infrastructure senior debt has become increasingly seen as a means of achieving enhanced, stable long-term cash flows.

Key Reasons

Key reasons for allocating to senior, investment grade infrastructure debt:
  • In a time of historically low Gilt yields, infrastructure debt offers enhanced spreads over mid-swaps.
  • Can be used as a matching asset (rather than as a growth asset in the case of infrastructure equity).
  • Long-dated maturities and highly secure cash-flows.
  • The default probability is lower (and expected recovery rates higher) relative to equivalently rated corporate bonds over the longer term. The infrastructure debt market has historically been dominated by banks and usually funded through floating rate loans plus swaps. Such a funding method can create complications for institutional investors and AllianzGI believes, given the size of its investments, that it is in a strong position to negotiate attractively yielding fixed rate and index-linked tranches.
  • As banks retrench from long-dated infrastructure project finance (in part driven by Basel III’s banking capital requirements) AllianzGI is well positioned to create opportunities for its investors through its broad network of market participants ranging from equity sponsors to bank lending partners.
To find out more email Philip Dawes or call him on +44 (0)20 3246 7443.
 
For professional investors only. Investing involves risk. The value of an investment and the income from it may fall as well as rise and investors may not get back the full amount invested. Infrastructure debt investments are highly illiquid and designed for long term investors only.