Infrastructure provides opportunities for private equity, hedge funds- report

By Nicel Jane Avellana

Nov 15, 2013 10:31 PM EST

A CNBC report said infrastructure has given a bright future for private equity and hedge fund companies. The combination of governments running with nearly empty coffers, reduced interest rates and opportunities for investment in ports, power plants and pipes has made infrastructure investments enticing for private equity firms.

In an infrastructure investing conference sponsored by the New York Society of Security Analysts, Mariner Investment Group Andrew Hohns said there is a huge financing shortage worldwide. Citing data from the World Bank, the World Economic Forum and other international organizations, Hohns said the need for finance debt issuance stands at USD 2.8 trillion to USD 3 trillion each year until 2030. However, only USD 205 billion to USD 370 billion annually is being met.

Railroads and ports, for example, are rife with investment opportunities. The report cites Fortress Investment Group which owns Florida East Coast Industries which is now constructing All Aboard Florida, a regional passenger train that would ply from Orlando to Miami. According the Fortress, it expects the business to provide estimated revenue of USD 350 million when it becomes operational.

Joseph Adams, who leads transportation and infrastructure of the private equity arm of Fortress Investment Group, said Fortress generally aims for a rate of return ranging from 15% to 25% for its funds. He also told CNBC that an opportunity could be found in ports. He said, "The port space is something that up until the last four or five years has been largely neglected in the United States. You look around the world and people realize ports are the gateway to exports and imports to a much, much greater degree. It's a big opportunity in this country and I think one that really is not properly financed or understood."

Hedge funds also saw an investment opportunity in infrastructure. Kingdon Capital Mangement, for example, said the oil field services sector in the US was worth looking into.

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