Infrastructure Investing: Managing Risks & Rewards for Pensions, Insurance Companies & Endowments (Wiley Finance, Band 549) - Hardcover

Sawant, Rajeev J.

Hardcover

ISBN 10: 0470537310 ISBN 13: 9780470537312

Verlag: Wiley, 2010

Inhaltsangabe

Invaluable information regarding one of the biggest worldwide growth areas in investing-infrastructure assets

Infrastructure investing is about to explode on the worldwide scene. The fact is that real money will need to be spent on real projects-which will present real opportunities for stable, long-term returns. But infrastructure assets have unique characteristics and the investments and funds that will likely rise up must be suitably structured to serve investor needs.

Author Rajeev Sawant has been analyzing infrastructure investments, funds, and project financing programs for nearly five years, and with this book, he presents information that will be invaluable to lenders, pension funds, insurance companies, investment funds, rating agencies, and even governments.

• Presents comprehensive data analysis on infrastructure cases worldwide
• Analyzes the opportunities as well as the pitfalls of infrastructure investing
• Focuses on the needs of pensions, insurance companies, and endowments interested in infrastructure investing

For the next decade, worldwide economic growth and increased employment-as well as investment returns-will come from infrastructure projects. This book will help you understand today's dynamic infrastructure asset class and quickly get you up to speed on the unique risks and rewards associated with it.

Über diesen Titel

Über die Autorin bzw. den Autor

RAJEEV J. SAWANT is a Research Fellow at the Center for Emerging Market Enterprises at the Fletcher School, Tufts University. Prior to this, heconsulted for JSA Partners (an A.T. Kearney spin-off) in international strategic alliances in aerospace and defense. Sawant is a member of the Academy ofManagement and the Financial Management Association, is an Inlaks Shivdasani Foundation scholar, and has served as Aide de Camp to the President of India. He holds a PhD inbusiness strategy and international management.

Von der hinteren Coverseite

"Over the next decade, North America, Europe, and the developing world will experience an unprecedented surge of investment in infrastructure. The promise for investors is great; the risks are similarly huge. In his Infrastructure Investing: Managing Risks and Rewards for Pensions, Insurance Companies, and Endowments, Rajeev Sawant has given us a road map to investing in infrastructure. His analysis and writing is crisp, clear, and politically and economically sophisticated. Rajeev's book is must reading for smart investors."―Frank G. Wisner, International Affairs Advisor, Patton Boggs, LLP, Vice Chairman External Affairs AIG, U.S. Ambassador to India

"Rajeev Sawant's Infrastructure Investing is at the intersection of two of the most daunting challenges of the first half of the twenty-first century: the surge of infrastructure investing necessary to sustain population growth and to improve living standards, and finding long-tenor assets for pension funds and insurance companies on behalf of an aging population with ever longer life expectancies. By unlocking the alchemy of project finance, Sawant uniquely establishes infrastructure investing as an asset class. A must-read for all asset managers and any serious student of global investing."―Laurent L. Jacque, Walter B. Wriston Professor of International Finance & Banking, Fletcher School, Tufts University

Aus dem Klappentext

Infrastructure investing has exploded onto the worldwide scene. The fact is that real money will need to be spent on real projects which will present real opportunities for stable, long-term returns. But infrastructure assets have unique characteristics, and the investments and funds that will likely rise up must be suitably structured to serve investor needs.

Financial markets researcher Rajeev Sawant has been analyzing infrastructure investments, funds, and project financing programs for nearly five years, and now, with this book, he presents information that will be invaluable to lenders, pension funds, endowments, insurance companies, investment funds, rating agencies, and even governments.

Written with the serious professional in mind, this reliable resource focuses on infrastructure's economic characteristics, highlights the rewards and perils that infrastructure investors face, and addresses the strategic threats they must mitigate. Chapter by chapter, this informative guide:

• Examines the characteristics of debt versus equity funding by applying the latest theoretical capital structure research to infrastructure funding

• Discusses project finance and the strategic use of capital structure as a risk-mitigation tool

• Explores infrastructure asset valuation issues and the return characteristics of a project finance infrastructure bond portfolio

• Outlines infrastructure risk factors, in particular, the threat of counterparty hold-up and the incentives this threat engenders

• Compares existing equity-based infrastructure indices to broad indices for equities, bonds, and commodities in terms of risk, return, and correlations

• Looks at two case studies that did not live up to the promise of infrastructure and applies the frameworks developed throughout the book

For the next decade, worldwide economic growth and increased employment, as well as investment returns, will come from infrastructure projects. This book will help you understand today's dynamic infrastructure asset class and enhance the returns you are able to obtain from it all while improving the quality of life for people around the globe.

Auszug. © Genehmigter Nachdruck. Alle Rechte vorbehalten.

Infrastructure Investing

Managing Risks & Rewards for Pensions, Insurance Companies & EndowmentsBy Rajeev J. Sawant

John Wiley & Sons

Copyright © 2010 John Wiley & Sons, Ltd
All right reserved.
ISBN: 978-0-470-53731-2

Chapter One

Infrastructure Demand and Investment Funds

Bijli, sadak aur paani (Hindi for "Electricity, roads and water") -Election slogan in India, 2004

Roads probably constitute the earliest human demand for infrastructure, and the earliest known constructed roads have existed in Ur in modern-day Iraq since 4000 BC. Indeed, the pyramids couldn't have been built without the roads on which the giant limestone blocks were dragged around between 2600 and 2200 BC. Civilizations advanced or declined around the quality of their road networks. The ancient Roman, Persian, Indian, and Chinese civilizations all built road networks that allowed them to rapidly transport military units while simultaneously encouraging commerce and trade. Trade routes joined the empires of China, India, Asia Minor, North Africa, and Rome. The next major infrastructure development came from the great discoveries of electricity and its applications by Benjamin Franklin, Nikola Tesla, Andr-Marie Ampre, Michael Faraday, Thomas Edison, and many others in the eighteenth and nineteenth centuries.

In the modern era, the term infrastructure refers to a wide array of industries with different characteristics. Traditionally, infrastructure refers to the following sectors of the economy: transportation, energy, telecommunications, water, and sanitation. Transportation refers to road, rail, airports, and ports. Energy refers to oil, gas, petrochemicals, and electricity generation, transmission, and distribution. Telecommunications refers to fixed lines and mobile telephony. Recently, information technology infrastructure that refers to the physical hardware used to connect computers and users is sometimes grouped with traditional infrastructure.

Commentators have also grouped social infrastructure like schools, prisons, hospitals, and courts under the rubric of infrastructure. Grouping fundamentally different industries like mobile telephony with schools and prisons obscures the fact that the risk and return profile of these assets is very different. Consequently these assets demand different investment strategies. We therefore need consistent criteria for classifying infrastructure industries.

In this book, I use asset characteristics as classifying criteria. Using asset characteristics as an analytical scalpel yields insights into infrastructure asset risks that help us design optimal investment strategies. For example, electricity generation using coal, oil, and nuclear fuel differs in fundamental and important ways from alternative energy sources like solar, wind, and so on. Chapter 2 is entirely devoted to this topic. In this chapter I choose the traditional infrastructure industries which Chapter 2 shows possess distinct characteristics-electricity, transportation (road and rail), water and sanitation, fixed-line telecommunication, and pipelines-for analyzing demand across different countries.

Using two distinct methodologies for analyzing infrastructure demand, I make the case that demand is growing and requires large investments that private investors can provide. Demand analysis shows which sectors and geographical areas are likely to be attractive to investors. Furthermore, the returns from these investments match the needs of pension funds and insurance companies in particular and therefore offer attractive investment opportunities.

AN OVERVIEW OF INFRASTRUCTURE DEMAND

Infrastructure demand refers to the investment necessary to satisfy retail consumer demands as well as producer or industry demands based on projected GDP growth. This makes sense because it's reasonable to assume that as disposable income rises, demand for a better quality of life in terms of electricity, water, sanitation, telecommunications, and transportation (air, sea, road, and rail) should increase. Industry, too, demands increased electricity, transportation, telecommunication, energy, commodities, and other inputs to keep pace with growth in its output. Demand, however, is unlikely to be uniform across industries and countries. This has been true historically and is likely to persist in the future. An analysis of sectoral and geographical demand is helpful to investors for targeting the appropriate industry and country. Exhibit 1.1 shows the change in worldwide composition of infrastructure stocks from 1960 to 2010. Water and sanitation is excluded because of lack of data.

Exhibit 1.1 shows that the share of rail dropped from a third to a mere 5 percent and the share of electricity doubled while telecommunications quintupled, albeit from a low 2 percent to 10 percent, over the 50-year period. Therefore, any linear extrapolation into the future based on past trends even in mundane infrastructure must be interpreted with caution.

A complex interplay of factors influences demand in different infrastructure sectors. Some of these include technology, substitutability (mobile for fixed line, road for rail), complementarities (electricity generation to electric trains), sectoral structure (number and strength of established firms resistant to change), macroeconomic factors (GDP per capita), and so on. Technology has affected demand for fixed-line telecommunications with mobile telephony replacing fixed lines in high income countries and leap-frogging investments in fixed lines in low- and middle income countries. Technology also influences oil, gas, and electricity generation with the development of alternative energy sources, although these are not likely to catch up with traditional oil, gas, and coal even by 2030. Exhibit 1.2 displays the factors affecting demand for each sector and the interaction of the sectors.

In addition to the factors and interactions shown in Exhibit 1.2, investors must take into account cultural attitudes and government policy encouraging or discouraging particular infrastructure industries in order to forecast infrastructure demand with any degree of precision. The next section develops broad estimates of infrastructure investments up to 2030. Note that forecasts tend to lose accuracy as the forecasting period increases, and a forecasting period up to 2030 is still very long. The forecasts presented are therefore meant to be interpreted as providing broad estimates and are meant to provide insights into asset allocations across industries and geographies.

Forecasting Infrastructure Demand

In this chapter I explore the methodology followed by the World Bank and the Organisation for Economic Co-operation and Development (OECD) to forecast investments for new assets as well as maintenance of existing infrastructure assets, using historical investment patterns as a percentage of gross domestic product (GDP). In addition, I use gross national income (GNI) to compare infrastructure stocks across countries with different levels of GNI. In the GNI method I extrapolate the future demand in low and middle income countries to match infrastructure in the high income countries.

In the percentage of GDP methodology, total spending on new infrastructure and maintenance varies with the GDP of countries. Developing countries need to spend a higher proportion of their GDP on...

Details zur Ausgabe

• Verlag: Wiley
• Erscheinungsdatum: 2010
• Sprache: Englisch
• ISBN 10: 0470537310
• ISBN 13: 9780470537312
• Einband: Gebundene Ausgabe
• Auflage: 1
• Anzahl der Seiten: 288
• Kontakt zum Hersteller: Wiley-VCH GmbH; product_safety@wiley.com; ; Boschstrasse 12; Weinheim; 69469; Deutschland