Investing alongside Allianz – and Benefiting from ACP’s Expertise
For years now, many European countries have been investing too little in maintaining and expanding their infrastructure. This underinvestment in infrastructure requires significant private capital to address the funding gap representing a significant market opportunity. The reasons for this are manifold – ranging from the sovereign debt crisis to increasing pressure on pension and healthcare systems.
Allianz's excellent reputation, capital strength and long-term buy-and-hold investment philosophy frequently result in differentiated deal origination opportunities. The Allianz European Infrastructure Fund (AEIF) offers investors the opportunity to invest jointly with Allianz, who will provide at least 50% of the capital for every investment – using the same established invetsment processes.
Leveraging Allianz’s deep global networks, technical expertise and a strong understanding of local dynamics as well as access to, and credibility with corporate executives, regulators and policy makers ensures rigorous execution and asset management. Investors can benefit from the following underlying framework:
Every year, the fund’s target sectors alone lack public funds of around €42 billion1. This is around one-tenth of the total amount that needs to be invested in infrastructure – and opens up investment opportunities for long-term investors
Substantial need for investment. It is estimated that by 2035, €8.6 trillion1 will be needed to finance infrastructure development in Europe. This translates to an annual investment requirement of €433 billion1 or 2.7% of European Union GDP.
Increased capital requirements. This is because some traditional funding sources are no longer available. Long-term bank loans, for example, are less available due to Basel III and other regulatory requirements.
Funding gap. Estimates point towards a financing gap of around €42 billion1 p.a. This equates to around one tenth of the total required investment in the fund's target sectors alone.
Our conclusion: The pressure for further privatisation and public-private partnerships is set to increase. This will create investment opportunities for long-term investors looking for appropriate returns in the low interest rate environment.
Numbers may not sum due to rounding.
1 Source: McKinsey – Bridging the Infrastructure Gap, 2017. Converted into US dollars at the spot exchange rate of 0.856 on October 10, 2018.
The energy policy turnaround, electro-mobility, urban growth, digitalisation and the trend towards greater sustainability: these trends highlight just how much these sectors are changing, and point towards the areas that offer potential for investors.
Energy transition. The growth of renewable energy and the increasing decentralisation of energy supply is fuelling a need for electricity grid expansion, greater storage capacities and additional interconnectors.
New mobility. Technological progress will have a particular impact on the transport sector, as e-mobility, car-sharing and autonomous vehicles become more common.
Urbanisation. Europe’s major cities are growing. This is creating big challenges for public transport and social infrastructure.
Digital transformation. Volumes of data are increasing at an exponential rate, as is the need for connectivity. This means that communication systems are having to be expanded at a rapid rate: both in cities and rural regions.
Sustainability. Reducing carbon footprint and taking ESG2 aspects into account: these concerns have long since made their way into the heart of society. This development is particularly relevant to investments in the transport and energy sectors.
Our conclusion: The structural changes in the demand for infrastructure in many sectors come hand-in-hand with a significant need for capital, including private capital.
2 ESG: Environment, Social and Governance
A large number of companies are redeploying capital investments into high-growth areas by monetising infrastructure assets at attractive valuations. This is opening up investment opportunities for major financial investors like Allianz.
Focused capital investment. Many large companies are currently shifting capital into higher-growth areas. They are also aiming to clean up their balance sheets and optimise their credit rating. This means that they are scaling down their infrastructure investments, which are often attractively valued.
Regulatory changes. One example is the process of unbundling within the energy sector; these changes are fostering restructurings and asset disposals like the sale of grids and power generation plants.
Strengthening of the ownership structure. In order to achieve this, companies are actively approaching financial investors of international standing and repute.
Our conclusion: Spin-offs, (partial) sales and joint ventures remain a reliable source of transactions for Allianz. Many companies favour ‘neutral’ investment partners who can contribute pan-European expertise. This is opening up investment opportunities for Allianz and long-term investors.