Resilience and Renewal

At the start of the month, the Financial Times reported that UBS had raised more than $1.5 billion dollars for a long-term infrastructure investment fund. The bank has plans to raise even more in a second round.

The fund is targeting a relatively high internal rate of return of between 10 and 13 per cent a year and says it is currently returning 13 per cent.
Its investments will focus on established infrastructure in stable, well-developed countries, which often operate as virtual monopolies and generate a lot of free cash flow.

Steve Jacobs, head of infrastructure asset management at UBS, says the new fund will make direct investments in companies and projects; the fund, he tells the Financial Times, has already taken stakes in Northern Star Generation, a US power generation business, UK-based Southern Water and Saubermacher, a European waste management company.

The move, according to the UBS press release, “underlines the sector’s relative resilience to the financial crisis.”

It will be interesting to see whether new hybrid forms of public and private investment in infrastructure emerge over the next couple of years.

Are we really headed for a “new New Deal”– or for something more ad hoc?

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