There may still be opportunities on the horizon for UK infrastructure funds in partnership with the government on large construction projects, a Gravis fund manager has claimed.
In last year’s Autumn Budget Philip Hammond called an end to the government’s practice of teaming up with private finance for big construction projects, claiming no future deals would be signed of that nature.
Private Finance Initiatives (PFIs) involve private funding for the construction of government infrastructure, with repayments made over multiple years, but they became controversial after public bodies were weighed down by debts and billions of pounds of extra charges were racked up.
But William Argent, manager of the Gravis UK Infrastructure Income fund, said the changes introduced in the budget did not necessarily spell an end to the role of private finance in large infrastructure projects.
Mr Argent said: "Mr Hammond also highlighted the significant infrastructure and construction pipeline in the UK, which amounts to around £600bn, and that the private sector will have to have a significant role to play in financing that.
"It won’t be under the PFI framework, it will be under some other framework which we don’t know yet, but I think in time there will be further opportunities for the PFI focused infrastructure companies and it will benefit them and also our fund."
In terms of an immediate impact on the Gravis fund and the companies in which it invests from Mr Hammond’s announcement, Mr Argent said there had not been one.
The Gravis UK Infrastructure Income fund has been running for three years but has underperformed its sector, the IA Specialist, in that time - returning 24.59 per cent while its sector returned 32.54 per cent.
But Mr Argent said the diverse nature of the sector’s funds, including emerging market, equities, commodities and strategies, meant its performance ranking was "largely inappropriate".
He said: "Our fund targets a 5 per cent net income yield, plus preservation of investors capital in real terms.
"Since launch the fund has delivered a 7.5 per cent total return on an annualised basis and that is very much in line with what we set out to achieve, and in line with investors’ expectations."
rachel.addison@ft.com
