A NASP-USAID Partnership for Mutually Beneficial Investments in Infrastructure
With institutional investors increasingly accepting infrastructure as a distinct asset class and looking for opportunistic investments globally as part of their infrastructure investment strategies, USAID’s Office of Private Capital and Microenterprise (PCM) and the Africa Private Capital Group of the Southern Africa Mission have partnered with the National Association of Securities Professionals (NASP) in a program for “Mobilizing Institutional Investors to Develop Africa’s Infrastructure” or “MiDA”. The initiative seeks to facilitate and expand opportunities for infrastructure investment in Sub-Saharan Africa for investors seeking higher returns, while making a great impact on development and advancing U.S. interests in the region.
The NASP-USAID Investment Partnership’s objective is to expose U.S. institutional investors to opportunities to co-invest with their African counterparts in Sub-Saharan Africa’s infrastructure as part of their global infrastructure investment strategies, with frontier market allocations targeting the region’s enhanced yields and low correlation with existing portfolios. Further, MiDA seeks to increase opportunities for U.S. financial services providers seeking to deepen relationships with African institutional investors who currently hold an estimated $1 trillion in assets, of which billions are invested in the United States. According to a McKinsey analysis, the region’s long-term fundamentals remain strong with domestic spending totaling over $4 trillion in 2016. Listed by the IMF as the second fastest growing region through 2020, African markets increasingly offer attractive opportunities for U.S. businesses and investors.
By expanding partnerships, facilitating co-investment opportunities, and providing transactions support, MiDA represents a mutually beneficial U.S.-Africa commercial and development relationship. The program has put in place an Africa Advisory Council composed of Executive Directors and Chief Investment Officers from some of the largest U.S. pension plans, insurance companies, endowments and foundations, asset managers, and investments consultants.
Infrastructure as a Global Asset Class with Attractive Opportunities in Africa
Bain & Co. estimates that the infrastructure market is valued at $4 trillion, combining fixing deteriorating infrastructure and building new projects in the U.S., and investing in emerging and frontier economies across Africa and Asia. In 2015-2016, global infrastructure funds raised record funds with larger allocations in frontier markets in pursuit of opportunistic deals in the fastest growing regions with the highest demand for infrastructure. By investing in infrastructure in Sub-Saharan Africa, U.S. institutional investors – primarily pension funds and insurance companies – can potentially benefit from enhanced yields, through longer tenor assets that better match their liability structure, and offer predictable, inflation-adjusted cash flows with low correlations with existing assets. Further, nowhere is the lack of infrastructure more crucial, transformational, and potentially profitable than in sub-Saharan Africa. According to the World Bank, investment needs are about $50 billion of new financing annually to close its infrastructure gap, mainly in energy, transportation, water, and telecommunications. Development financial institutions (DFIs) are focusing their efforts on providing the necessary support – triple-A rated guarantees, co-investment vehicles, project development and governance, and other risk mitigation support – to incentivize institutional investors to bridge this financing gap. MiDA’s transaction experts are working closely with DFIs to source investable opportunities with credit enhancements to match U.S. investors’ risk-return profiles.
NASP and USAID are Joining Forces
NASP and USAID are joining forces at a time when the global agenda for mobilizing institutional investors for Infrastructure is undeniably moving forward, with many high-level international initiatives to increase the pipeline of bankable projects, the offering of new instruments and vehicles, and improved credit enhancements to crowd in institutional investors.
The National Association of Securities Professionals (NASP) is a U.S.- based membership organization supporting women and minorities working in the securities and investment industry. Most of its 600+ members manage large pension funds or advise institutional investors in the United States. The NASP Institute is attended by more than 150 executive directors, chief investment officers, and trustees from 70 of the largest pension plans across the United States. Total assets under management of NASP pension plans equals close to $3 trillion, representing close to 40% of pension systems in the United States.
USAID is the United States Government Agency for International Development. Its mandate is to promote broad-scale human progress at the same time it creates markets and trade partners for the United States, and fosters good will abroad. USAID’s Office of Private Capital and Microenterprise mobilizes commercial capital at scale to achieve development priorities by directly supporting transactions and partnering with private investors to increase viable investment opportunities and mitigate risk.