Infrastructure debt

Infrastructure assets form the economic backbone of a country; they are the basis on which economic growth is founded.

We group infrastructure assets into four main categories, as follows:

Infrastructure debt can offer long-dated, stable returns. These returns are based on cashflow, rather than on real-estate values or capital growth.

The key characteristics of infrastructure businesses, which can support these stable returns, are as follows:

• Essential assets
• High barriers to entry and exit for competitors and customers respectively
• Stable cashflow generation
• High recovery rates
• Low correlation to the economic cycle or other asset classes
• Potential for inflation-linkage

M&G has sourced a variety of infrastructure debt transactions to suit a number of investor requirements, including the following:

• Public or private debt
• Bond form or loan form
• Primary market or secondary market
• Liquid or illiquid debt
• Index-linked, fixed or floating interest rates
• Senior or junior debt
• Sterling, euros or other currencies
• Amortising or bullet repayment profile

M&G has been investing in infrastructure debt, building and managing its portfolio for a number of decades.

Our infrastructure debt investments currently stand at c.€45bn*, spread across a range of different business types, structures and geographies.

We have been at the forefront of investing in the sector on a private basis, having built a private debt capability in the late 1990s to complement our long-standing public debt experience.

Our focus on detailed credit analysis, thorough due diligence and risk adjusted return, has enabled our client funds to avoid poorly performing deals and obtain strong performance from their infrastructure holdings throughout the credit cycle.

*As at 30 June 2020.

Where past performance is referenced, please note that this is not a guide to future performance.

M&G takes its responsibilities as an investor seriously. Since environmental, social and governance (ESG) issues often develop over the longer term, and many of our investments are long-term and illiquid, ESG factors can have a material impact on investment outcomes. We regard it as part of our fiduciary responsibility to include ESG issues in our investment views, as we do for all factors that influence long-term investment results for our clients.

Further detail on this, together with a case study on a private debt transaction concluded in the renewable energy sector, can be found on the Fixed Income page of our Responsible Investment site.