The role of private institutional investors for the development of urban infrastructure assets

Thesis

The topic of infrastructure investment has emerged as a critical public policy issue over the last thirty years as governments grapple with an infrastructure deficit that has become one of the great global challenges of our time. Through the simultaneous processes of neo-liberalisation and globalisation, the urban infrastructure landscape has emerged as an attractive investment area for large financial institutions. With the recent Global Financial Crisis further exacerbating both the funding and growth lifting needs of nations, the urgency of linking institutional investors with urban infrastructure assets is more apparent than ever.

This thesis looks at the evolving dynamics associated with the growing involvement of the financial industry in the provision of urban infrastructure assets. This is achieved by using a relational perspective, studying the interactions of financial actors, while simultaneously being aware that these decisions are made within a larger political economic context. It is argued that the complex, heterogeneous and long-term nature of institutional infrastructure investing requires a multi-disciplinary relational economic geography framework. Specifically, relational theory is used to explore the informational content and geographical structure of the infrastructure financial product, the influence of government decision-making, the corporate governance of infrastructure investments and the investment relationship between investors and financial intermediaries.

Despite exponential growth in the field over the last decade, the infrastructure financial product has a level of sophistication and obscurity that prohibits it from being classed a transparent investment area, highlighting the importance of a relational approach to investments. From the case study on Auckland International Airport Ltd., it is shown that through a relational form of light-handed regulatory contract, the government plays a central role in affecting the favourable performance of an economically significant asset. The explication of the Spanish-led ADI consortium acquisition of UK airport operating company BAA illustrates the need for ‘glocal’ infrastructure governance to incorporate a wider stakeholder perspective as well as an appropriate shareholder wealth maximisation strategy. And finally, through analysing the relationships between investment partners for the infrastructure investment process, investment consultants are playing a crucial role to help align interests and promote the long-term relational approach to investing for the infrastructure asset class.

In an age where infrastructure investment has been recognised by many nations around the world as the most important growth lifting strategy, this thesis provides a deeper understanding of how a relational approach can facilitate successful private institutional infrastructure investment.

Authors: Sharma, R

• Publication date: 2012
• DOI: 10.5287/ora-kojqbp9vo
• Type of award: DPhil
• Level of award: Doctoral
• Awarding institution: University of Oxford
• Language: English
• Keywords: economic geography; urban infrastructure; institutional investment
• Subjects: Geography; Globalisation; Pension Fund Investment; Global; Transport