Investing in infrastructure for the longer term

Europe’s infrastructure landscape has evolved significantly over the past ten years amid a trend which has seen institutional investors encouraging the emergence of an increasing number of asset managers. In this new climate, the emphasis should be on enhanced stakeholder supervision to not just invigorate the sector, but to carry it into a period of long-term prosperity sustainably.

A concerted issue for core infrastructure assets during this period has been the focus of public grantors on exit values of assets, with the extraction of cash flow restricting the sustained care of vital public services. To this end, Vauban Infrastructure Partners (Vauban IP) have looked to champion the influence stakeholder-driven projects could have on reversing the trend.

“We believe that for our clients to attain long-term regular cash flows from their investments, they need to take a more long-term approach so all parties are satisfied, not least the local communities benefiting from these assets,” explains the company’s founding partner and deputy chief executive Mounir Corm. “Low satisfaction rates yield short-term thinking, an effect of a shareholder-driven approach.

“Vauban IP want assets to instead benefit from long-term, regular, targeted investments, which go hand in hand with a stakeholder-driven approach.”

This focus fits seamlessly within Vauban IP’s ongoing drive for longevity and sustainability in infrastructure. Founded in 2005, with a focus on greenfield opportunities, the business has practised what it preaches on continuous improvement and trend adherence.

Now, with a refreshing view on preservation, conservation, community enrichment and sector stability, the company is urging others to follow suit.

“We have seen the evolution of our market over the past ten to fifteen years and managed to evolve too, moving from being an infrastructure partner initially focused on greenfield opportunities, which we were very active in until around 2013, to a shift towards brownfield investments,” says founding partner and chief executive Gwenola Chambon.

We want assets to benefit from long-term, regular, targeted investments, which go hand in hand with a stakeholder-driven approach

“Over the past five years we have been fundraising and deploying several generations of brownfield funds, all through this view of longevity. We are convinced that the best way to deliver revenue on core assets is to ensure long-term sustainability, especially in an environment of very low interest rates.

“We have consequently become a huge draw in the market because we’re aiding its evolution, responding and adapting to new trends and policies, rather than thinking short term to safeguard against them.”

Few operators can claim the client base, experience, quality of service and reputation for positive transactions and interest alignment that Vauban IP now enjoys. The very essence of this success, however, is not to stay with the status quo and instead to prepare for what’s next.

Chief among these future trends, Corm believes, is the rapid digitalisation of the infrastructure sector, as leveraging data becomes more of a differentiator in a traditionally tech-resistant domain. He adds the influences of environmental sustainability and the pressure that should be exerted on public governance spending as additional market fluctuations, providing both risk and opportunity for asset managers.

For those wanting to embrace and capitalise on all three, a similarly forward-thinking perspective will have to be taken.

“I think it is becoming more popular as an approach,” Corm affirms. “Our clients have seen how we changed approach five years ago, to challenge the industry, and they are seeing the benefits of it more and more.”

Chambon concludes: “There are so many asset managers out there. To face this increasing competition, over the past decade, we have managed to build an outstanding track record of investments, to network with industrial entities and to build industrial platforms to successfully deliver strong performance to our investors.

“Looking forward I now hope that players in this market not only see the benefits of long-term thinking, but also encourage better alignment between private and public investment, which is essential for the very legitimacy of private investment in these essential assets. Ultimately, it is all for the greater good of the communities affected and there is so much money ready to be invested.

“By finding a more sustainable and appropriate solution to this balancing act, we can see a real infrastructure boom in the months and years to come.”

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