AIMCo's Leo de Bever Cautions Against Infrastructure

(July 19, 2010) — While Leo de Bever, the CEO of Canada’s Alberta Investment Management Corporation (AIMco) often regarded as the king of infrastructure investment, once championed the asset class as a prized source of investment, he’s since changed his mindset.

“The time to be in infrastructure is not now,” De Bever told CTV News in Canada. “It’s too expensive, everyone’s in it. Whenever everyone’s in it, you want to back off.”

De Bever’s dismal outlook on infrastructure contrasts with the growth of infrastructure investment among pensions, insurers, and banks that are funneling resources into the space as they seek long-term stable cash flows. The Canada Pension Plan Investment Board’s $3.4 billion takeover bid last week for Macquarie Group Ltd.-backed Intoll Group, a Sydney-based owner of infrastructure assets, marks the perceived attractiveness of infrastructure assets, such as toll-roads and airports, for the world’s pension funds.

“The promise of infrastructure is that investors can get long-duration, low volatility, inflation-protected, low-correlated and attractive returns,” said Kevin Greene, the ex-CEO and chairman of pensions consultant Rogerscasey, to ai5000 previously.

However, De Bever told CTV News that one of the problems with infrastructure, especially during tight fiscal periods, is encountering regulatory risk. “…You have to be absolutely sure…that the government sticks to the original deal and doesn’t try to change it after the fact,” he said.

De Bever, the head of AIMCo, the corporation created to manage Alberta’s pension and sovereign wealth capital, has not completely dismissed the asset class. “In most places, water and sewage are going to take an enormous amount of capital because everything is starting to leak,” he told CTV News. “Given that the fiscal positions of a lot of these governments are pretty weak, private capital has to come in at some point, and that’s when I think infrastructure will become attractive again.”