The Risks of Infrastructure Investment


There are numerous ways of investment; infrastructure investment is one of them. The way an infrastructure investment works is pretty different form the other type of investments. Some of the key features of this type of investment are:

  1. This is contracted only for a fixed period of time and for the operation of an infrastructure asset.
  2. Since the entities having a share in this kind of investment do not own a complete 100% of it, therefore they do not have enough control over the asset as well.
  3. These sort of projects are quite unique and hence difficult to compare.

 However, it is important for every earning individual to make some sort of investment and even more important to have a diverse portfolio; and there is nothing better than an infrastructure investment that could help you get that diversification. The company that Bob Stefanowski functions as the chairman and manager of the North America and Asia office, the 3i group is an international investment company, and infrastructure investment is one of their products. They invest in various infrastructures, particularly primary PPP and low risk energy projects. Their investments are mainly made in Europe.

Though investing in any infrastructure lends a good diversification to your portfolio yet there is no denying the fact, the risks it carries with it. Any kind of investment has to have some amount of risk attached to it no matter how much people say that they are risk free. Every investment comes with a statutory warning that says, “All investments are subject to market risks”. So it is not possible to keep investment and risk away from each other; but what you can do is to know about those risks and try and become more cautious and careful thereby reducing the losses.

The first risk lies in its Cash flow forecast. The optimism of the infrastructure investment may speak a lot about and make assumptions regarding the cash flow, however, if enough cash flow is not generated to meet the expenses and debt repayments, there might arise situations when they may not be able to pay your return money. So, the risk here is that you may not get your expected money exactly when you want it.

These investments make forecasts pertaining to the performance and usage; it is probably these forecasts and assumptions, which if go wrong seem to break the sky on your head because the incorrect assumptions may lower the value of the investment.

One very important risk attached to this kind of investment is that it is rather hard to sell and they may also be difficult to get them converted to cash when you require the money.

The risks pertaining to the investment in infrastructure came to the fore during the global financial crisis when many infrastructure companies actually collapsed and hence it has always come as to definitely get in touch with experts before investing.

Bob Stefanowski also functions s the financial services sector team of the 3i company that invests in infrastructures and they too take a lot of care prior to doing so.