Asian insurers are increasing allocations to infrastructure debt as changes to risk-based capital regimes across the region improve the asset class’s regulatory treatment, according to a report by The Business Times.
Emaad Sami, senior investment director for infrastructure debt at Schroders Capital, said regulators in several Asian markets, including Singapore, are encouraging greater institutional investment into infrastructure financing through adjustments to capital frameworks.
Sami said the asset class offers institutional investors exposure to essential service sectors that are less sensitive to economic cycles, while also providing a fixed-income-like return profile that is not dependent on exit activity.
Damien Gardes, co-head of infrastructure debt at Schroders Capital, said the segment can offer a significant premium over investment-grade infrastructure debt for investors able to underwrite the additional complexity of the market.
The firm added that infrastructure debt has historically demonstrated lower default rates than similarly rated corporate lending, supported by the tangible nature of the underlying assets and the essential services they provide.
Schroders Capital highlighted energy transition and digitalisation as two of the key long-term themes driving demand for infrastructure financing globally, particularly across Europe, where substantial investment is being directed towards renewables, transport and communications infrastructure.
According to the firm, interest in European infrastructure debt is growing among Asian institutional investors, including insurers, pension funds, family offices and foundations across markets such as Japan, Korea and Singapore.
