One of the leading voices in German finance has said that there is great room for private capital to aid in investing in the country’s infrastructure.

Speaking to Börsen-Zeitung, Bundesverband Alternative Investments (BAI) managing director, Frank Dornseifer, said that it would be better overall if infrastructure projects were bundled together in order to streamline the process and attract private capital.

One area that Dornseifer pointed to was an amendment to the European Long-Term Investment Funds, Eltif 2.0, which he said had created the vehicle that was suitable for large, illiquid assets such as infrastructure.

Dornseifer’s remarks follow developments earlier this year that made it easier for pension funds to invest in infrastructure within Germany. In February, an amended Investment Ordinance now allows for a dedicated infrastructure quota and more flexibility when it comes to risk capital investments.

Back then, the German government amended the German Ordinance Act, in the words of legal firm BCLP, to represent "a nuanced response to several intersecting challenges: The need for infrastructure investment, the pressure on institutional investors to find yield in a complex market environment, and the ongoing necessity to balance risk management with investment opportunity".

One of the key introductions within the new ordinance was that of a 5 per cent infrastructure quota. This allows regulated investors to allocate up to 5 per cent of their guaranteed assets directly to infrastructure projects and companies without these investments counting against other existing quotas.

BCLP wrote: “What makes this change particularly notable is the breadth of its definition. The amendments encompass both direct and indirect investments in ‘infrastructure facilities and infrastructure companies’ that serve the ‘erection, expansion, renovation, maintenance, provision, holding, operation or management of infrastructure'.”

It added: “While the regulation does not explicitly define 'infrastructure', it appears to adopt a broad interpretation that could include energy, information technology and telecommunications, transport, health, water, food, and financial services sectors.”

The regulation, said BCLP, was ‘intentional and pragmatic’ in that it allows for adaptation to the changing needs of infrastructure and subsequent investment. It also noted that infrastructure defies simple categorisation as an asset class.

Overall, it concluded that the ordinance represented both opportunity and challenge for pension funds, insurers, and other regulated investors.

According to the BAI’s own website, the organisation exists as a cross-asset and cross-product interest group for alternative investments in Germany. Founded in 1997 in Bonn, it looks to improve public awareness of alternative investment strategies and assets.

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