July 15, 2024
A version of this article was originally featured in El Pais.
‘Globally, there is a need to build and renovate infrastructure’, says Macquarie’s Ben Way
The Group Head of the Australian asset manager acknowledges that changes to renewable energy subsidies challenged global investors' confidence in Spain. "That was a long time ago. Now the outlook is very positive," he says.
Ben Way visited Spain last week to meet several hundred clients from all over the world in Barcelona. The Group Head of Macquarie Asset Management combined this important meeting with a holiday to Toledo, Seville and Granada. Just before the interview, the financier spent three hours touring Madrid’s Prado Museum – "Goya's late paintings impressed me the most" – and the day before that he enjoyed Guernica at the Reina Sofia Museum.
Australia's Macquarie Group is the world's largest infrastructure investor and its asset management business has assets under management of over €550bn (as at 31 March 2024). Way leads a team of 2,450 people based in 23 different markets. Macquarie Group has various different business lines, with divisions dedicated to financial services for the commodities sector, retail banking, a powerful investment bank and Macquarie Asset Management, an asset manager that invests in toll roads, airports, wind farms and data centres.
It invests on behalf of the institutional clients that put their money into the funds – insurance companies, pension plans, private banks. These products are not accessible to everyone. The minimum investments are very high and the minimum investment period is often more than seven years.
In Spain, Macquarie owns the electricity company Viesgo, 20 per cent of Exolum (formerly CLH), Viamed hospitals, car park operator Empark and Cero Generation, which is based in London but has several renewable energy plants in southern Europe. It also partners with Ferrovial on the management of various UK airports and works with Mapfre and Abante Asesores, which invest in its funds.
Question: Is infrastructure investment in fashion at the moment?
Answer: The group has been investing in infrastructure for more than 30 years. But it is true that whenever inflation rises, there is additional interest in this asset. The companies we invest in are counter-cyclical to an extent, and allow for inflation hedges. Our clients see infrastructure as a good place to put their capital, with a relatively low level of risk.
Q. Are there other factors at play?
A. Many institutions and investors around the world have realised that they were over-exposed to equities and debt, to liquid assets, and now see that it is positive to have more variety. Infrastructure allows access to yield, and also asset appreciation. This type of illiquid or unlisted asset mitigates the volatility of financial markets.
Q. Which investor profiles are looking at infrastructure?
A. In private banking, a few years ago it was enough to hold a portfolio of 60 per cent equities and 40 per cent debt, but that has changed now. Clients increasingly understand the importance of having exposure to the infrastructure that will be decisive in the economy and society of the future. Institutional clients are aware of the importance of allocating part of their portfolios to these illiquid assets.
Q. Is that also the case in Spain?
A. Yes, here too. Although it is very important for us to have good partners to reach the end client. That's why we seek to work with leaders in private banking and in the insurance sector.
Q. There is investment appetite, but are there really attractive projects?
A. Of course. Globally, there is a need to build and renovate infrastructure and the finance needs of these projects is almost €100 trillion. In fact, there is a growing number of infrastructure fund managers. This competition is healthy. There is business for everyone. This affects both advanced countries and the entire global south.
Q. You have invested a lot in Spain in the last few years. Is this trend going to continue?
A. We have been investing here for 20 years. First we invested in toll roads. Now we have five portfolio companies, from hospitals through to renewable energy. We have always had a good experience in this market. It is a well-regulated market and we still see a lot of opportunities, especially in the field of energy transition and digitalisation, with fibre optic networks and data centres.
Q. In the last two years there have not been many transactions.
A. Not here or anywhere else. Interest rate hikes have led to an adjustment in prices. But now that monetary policy is starting to shift, we are very optimistic. We expect to see significant investment opportunities in areas such as waste treatment and water management, and in everything related to renewable energies, including biofuels.
Q. Is there sufficient legal certainty in Spain?
A. Twenty years ago there was a legal change regarding renewable energy subsidies which somewhat undermined confidence in the country. But that was a long time ago. I think the general impression of the sovereign risk in Spain is very positive. Also, all countries have made these kinds of tweaks to their regulatory frameworks. It is not fair to look at those cases in the past. Spain has evolved a great deal and is in a very good position.
Q. In what way?
A. Fiscally, in its macroeconomic forecasts, the tourism boom. There are also world-class infrastructure operators in Spain with which we share some projects - referring to Ferrovial. Spain is perceived as a very attractive market.
Q. The government here is very favourable to the energy transition.
A. It is. It is one of the most favourable in Europe. And it makes a lot of sense to try to diversify energy sources and look for cleaner, cheaper energy.
Q. Is clean energy one of Macquarie’s main assets?
A. Yes. It’s important to remember that three years ago, the world invested almost a trillion dollars in energy transition projects, and today renewable energies employ more manpower than any other energy source. We are one of the world’s largest investors in renewable energy with 105 gigawatts of green energy assets in operation, under construction and in development. We have projects in South Korea, the United States, Mexico and Germany.
Q. Do you have investments in Argentina, now that the government is theoretically more pro-market?
A. That is not a market we are invested in. Over the coming decades, who knows. To enter a new market generally we take some time and we do it little by little. We have to feel comfortable investing there. We have recently invested in countries such as Indonesia, Poland and Colombia. At the moment, Argentina is not a priority for us. Things need to change for us to be comfortable there with the macroeconomic outlook, the regulatory framework and government policy. In the end, it is our clients' money we are investing and we have to be cautious.
Q. Which countries offer the best regulation to support the energy transition?
A. Infrastructure management contracts are very similar all over the world, from Korea to Germany. But there are differences in how incentives and industrial policies are designed. In the case of the United States, the Inflation Reduction Act (IRA) introduced by the Biden Administration has made a difference. It is an investment risk-sharing policy, which is something South Korea did in the 2000s, which makes it much more attractive to invest in infrastructure. It is also supporting the whole supply chain, attracting talent there. I think other countries have seen that this is the way forward. The European Union should respond with a similar policy. What the IRA has shown is that well-designed industrial policy can be very impactful.
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