Investing in Infrastructure – Public-Private Finance

by David Redmond on 11 Aug, 2011

Investors looking for a safe return on their capital during an unpredictable time for markets of colours could do a lot worse than investing in infrastructure. As governments across the world are looking to save money and cut down deficits, they are increasingly looking for private partners to help fund basic services: schools, hospitals, roads and the like.

The advantage of this sort of investment is that unlike the purely private markets demand is not going to disappear. The need for this sort of infrastructure is not going to go away, and neither is the government’s need for private investment. The dual pressure of increased expectations and the higher unpopularity of higher taxes (along with ideological shifts since the 1970s) have meant that public-private finance initiatives are only becoming more common, and this has never been more true now that public finances are in such dire straits.

Most funds are unlikely to yield spectacularly high returns, infrastructure is definitely more of the slow and steady type if investment, but they make for a fairly safe haven in an uncertain market, and provide better percentages than most savings accounts, currently averaging between 4% and 6%. And if you’re of a public service inclination, you can also rest easy knowing that your money is helping to keep a hospital going (for example).

As with any investment there are risks, such as the government deciding they want to renegotiate the terms of the contract, but the actual object of the investment is not going to go away any time soon. Similarly, although most infrastructure is safe, in the current climate of cuts not everything is certain. Just as AAA rated UK government bonds once seemed like a safe investment, participating in a public-private finance initiative to fund libraries may turn out to be riskier than it once seemed.

That being said, anyone looking to earn greater returns than they could with high street savings mechanisms in a relatively safe manner would do well to investigate the possibilities of infrastructure investment.

About the Author

David Redmond

David Redmond is a Partner of Don Gilliard Finance Group. He is a fee-only, independent financial advisor and financial planner. For over 15 years, he has been helping individual investors and their families realize their investment goals.