Asset AllocationApril 8, 2014

Colombia Matches Europe on Infrastructure Spend

Four Colombian pension funds are to spend as much on domestic projects as European investors committed to infrastructure funds during the whole of 2013.

Reported by Featured Author

(April 8, 2014) — Four private sector Colombian pension funds are to invest $12.7 billion in road infrastructure projects over the next seven years, matching the total raised by European infrastructure funds for the whole of 2013.

Data from Preqin’s Global Infrastructure Report 2014 showed Europe-focussed infrastructure funds closed in 2013 after raising an aggregate of $12.8 billion. By comparison, North American infrastructure funds raised $17.2 billion.

The president of the Colombian pension funds association Asofondos told Reuters that a major government project to expand the nation’s roadways had inspired the investment. The government needs as much as $25 billion between now and 2020 to complete the planned works.

The funds, known as AFPs, usually concentrate their investments in capital markets, including government-issued debt, company shares, and telecommunication and energy-sector bonds.

They collectively already have 20% of their assets invested in infrastructure, but are looking to increase their exposure.

Santiago Montenegro, president of Asofondos, said the funds were considering infrastructure bonds which would generate returns through assets such as toll roads, as well as buying up short-term bank loans to construction companies and converting them into bonds.

“What we have considered up until now is investing in the operation phase of infrastructure bonds,” he said.

“We are also studying along with the government the possibility of getting involved… via a new asset, a type of private capital fund for debt, and being on board from the construction stage.”

Montenegro went on to highlight the example of Latin American neighbour Chile, where pension funds had financed urban and national highways, airports, public buildings, and jails.

Colombia’s private pension fund business is controlled by Scotiabank’s Colfondos, Porvenir, GrupoSura’s Proteccion, and Old Mutual’s Skandia, which between them manage almost $79 billion.

Preqin’s 2014 Global Infrastructure Report also that globally, $38 billion was raised for infrastructure funds in 2013, with 78% of the total capital raised being put to work in North America and Europe.

Two of the largest unlisted closed infrastructure funds are focussed on South America: BTH Pactual’s $1.4 billion BTG Pactual Brazil Infrastructure Fund II and Actis’s $1.2 billion Actis Energy III fund.

The pensions funds’ investment also dwarves that of a major co-investment deal between Japan’s GPIF and Canada’s Ontario Municipal Employees Retirement System (OMERS). In March, the two funds committed $2.7 billion to a five-year co-investment agreement, to be spend on projects carried out with the Development Bank of Japan.