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Private equity, hedge fund firms seizes opportunities on crumbling infrastructure

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(Credit: Reuters) Railways, like the sample in this picture, are assets currently attractive to private equity and hedge fund firms.Railways
November 17
3:21 AM 2013

According to a CNBC report, private equity and hedge fund firms had been seeking various ways to provide financing for infrastructure projects. Some of them are looking to invest in transportation systems such as railways and ports, and thought that they were very attractive as interest rates had dipped and governments had been divesting them at lower values.

In a New York Society of Security Analysts conference in infrastructure investing on Friday, Mariner Investment Group managing director Andrew Hohns said, "The financing shortage right now is staggering around the world."

Hons also pointed out at the conference that the need for financing was bigger than the capital issued. Annual project finance debt issuance on average fall within the USD205 billion to USD370 billion a year range. Financing need for infrastructure projects falls within the USD2.8 trillion to USD3 trillion per year range, according to international organizations including the World Bank and the World Economic Forum.

Private equity and hedge fund firms like Fortress Investment Group had been saving stagnant government projects. Fortress, for example, built a regional passenger train operation called All Aboard Florida connecting from Orlando to Miami. The train service acquired from Amtrak was expected to generate USD350 million revenues a few years after the project would be completed.

Fortress' private equity arm head of the transportation and infrastructure Joseph Adams also talked about investing in port services and said, "We think it's a very, very attractive investment, very viable, and makes money. 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," Adams said. "It's a big opportunity in this country and I think one that really is not properly financed or understood."

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