Low-risk investors boost HICL

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High demand from risk-averse investors and a strong pipeline of large infrastructure projects have benefited HICL, one of the UK’s biggest listed infrastructure funds.

HICL Infrastructure, which invests in public sector projects such as hospitals, roads and schools, said it invested £143.8m in the last three months of 2012 by acquiring seven assets and increasing its stake in two existing investments. Its portfolio now has 79 assets and is valued at about £1.2bn.

In an interim management statement on Monday HICL said there was a “healthy” pipeline of investments that would attract people seeking high returns with low risk – since their revenue comes from UK public bodies. The group said it is aiming to raise more money through a share placing in March.

“We would expect [the placing] to be well-received,” said Keith Pickard, director of infrastructure at InfraRed Capital Partners, which manages HICL.

The group said there was strong appetite for its shares from investors in the last quarter of 2012, when it raised more than £105m. However, Mr Pickard said HICL did not want to raise more money than it needs in the short term, which would not “have a home”.

The closed-ended fund mainly invests in projects built through the private finance initiative, aimed at increasing private sector involvement in delivering public services.

The PFI system of infrastructure procurement is set to be succeeded by PF2, but HICL said it did not expect the new policies to have a major impact on the returns they generate for investors – HICL’s historical yield to shareholders is 5.8 per cent per year.

However, Iain Scouller, an analyst at Oriel Securities, said returns for listed infrastructure fund sector may be lower under the new system. “While PF2 is at an early stage it is possible that the returns to investors will be a little lower than they would have been under PFI,” he said.

The government released some details about PF2 in the most recent Autumn Statement, which said any changes would only be applied to new projects. PF2 is expected to cut the costs of major refurbishment projects and to increase energy efficiency. The group said it was encouraged by the government’s commitment to secure £310bn in funding for new infrastructure projects by 2015 – more than half of which are expected to be owned and financed by the private sector.

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