Why Infrastructure

Low risk return profile

Reliable cash flows

Inflation protection

Low Beta

  • Confidence in distributions
  • Long-term investments in regulated industries
  • Inelastic user demand contracts

  • Long term off-take agreement
  • Explicitly CPI-linked revenues
  • High correlation to inflation
  • Low correction to equities and nominal bonds
  • SA faces massive infrastructure requirements
    • R3 trillion over 15 years
    • Government cannot fund it all
  • Characteristics of infrastructure investments
    • High barrier to entry – capital intensive, regulated pricing
    • Pricing power – consistent increases in prices over time, including pass over to clients
    • Predictable long-term cash flows – through long term contracts, limited cyclicality, regulated returns
  • SA has highly developed savings industry
  • Banks cannot be long-term holders of assets (Basel III, borrow short, lend long)