The International Finance Corporation (IFC) is seeking to bring further financing to emerging market projects by channelling institutional money towards infrastructure debt, according to its infrastructure chief, PDI sister title Infrastructure Investor exclusively reported.
Bernard Sheahan, global head of infrastructure at the World Bank affiliate, said that the organisation is in the advanced stages of launching separately managed accounts targeting the asset class.
The initiative builds on a pilot scheme the institution started two years ago as it sought to replicate the unit's success in providing equity to infrastructure projects, Sheahan said. Now fully deployed, this first structure saw IFC invest $3 billion in infrastructure debt on behalf of the Chinese central bank.
The organisation is now keen to attract a wider pool of capital to the asset class, Sheahan explained, by marketing similar structures to institutional investors. “Infrastructure debt is of particular interest to insurance groups, in contrast to pension funds, which tend to favour infrastructure equity products.”
Such platforms, he reckons, will allow investors to benefit from IFC's strong origination capabilities, relationships and diversification. Most importantly, these separately managed accounts will be bolstered by credit enhancement mechanisms, with IFC's provision of first-loss capital intended to give them an investment-grade profile.
“Following the same methodology as Moody's, we're offering to bridge the gap between emerging market debt and what investors expect from a similar opportunity in OECD markets,” Sheahan said, adding that the organisation aimed to boost the asset group's overall rating to about BBB.
He argued that IFC's roughly 350 investment staff allowed the organisation to originate assets across more than 100 developing markets, when more limited teams tend to restrict institutional investors – even those with direct capabilities – to the largest of them.