CG/LA Infrastructure's InfraBlog
Wealth advisers are steering clients into infrastructure deals. Brooklyn Bridge not included.
By THOMAS COYLE
FOR MOST OF US, a toll road is just another expense. But for a family with vast resources and a long investment horizon, it can be something quite different: a source of income.
In growing numbers, rich families are investing in infrastructure, putting their money to work on remote mountaintops, bustling harbors and across deserts the world over. This broad category covers the structures and systems needed to keep economies running and growing. So think highways, public transit, power plants, telecom backbones—and don’t forget schools, hospitals, dumpsites and ports. “We see it all the time,” says Alan Harter, of Pactolus Private Wealth Management, a registered investment adviser in McLean, Va.
Most wealthy families get into infrastructure the same way other investors do: indirectly. They buy stock in multinationals whose wares and services generally accompany development—outfits like Caterpillar, Haliburton and IBM IBM -0.59% . But some are making direct investments. These hands-on deals can involve private-investor groups that come together to build or buy projects and operate them over a relatively long period.
The Presidio Parkway, a six-lane toll road that will connect the city of San Francisco to the Golden Gate Bridge, is one project that some private investor groups are considering. In another case, Citi Infrastructure Investors, Ullico and J.P. Morgan Asset Management Infrastructure Investments Group have been looking at putting money into Chicago-area projects. One deal calls for spending up to $225 million to reduce energy consumption at municipal facilities. The savings initially would be used to pay back the private investors with interest.
Some of the infrastructure investors—Harter calls them “uber bulge bracket families”—still run businesses that made them rich. Infrastructure is central to their wealth-building strategies; securities can account for as little as 15 percent of their portfolios, says Harter. Some are still steamed about the stock market in 2008, which saw the average U.S. millionaire’s securities portfolio shed about 30 percent of its value, according to research firm Spectrem Group. This distrust sometimes extends to other alternatives. “Our clients look distastefully on blind-pool” investments such as hedge funds, says Harter, whose firm manages about $430 million.
Taken from The Wall Street Journal: http://online.wsj.com/article/SB10001424127887323949404578314204271094348.html?mod=rss_Family_Finance