Canadian pension fund investors in transport infrastructure: A case study

Abstract

Policy makers and scholars have increasingly identified pension funds as an important source of private capital to finance the next generation of critical investment in infrastructure. However, to date pension funds globally have not been significant direct investors in infrastructure. This paper examines the opportunities and barriers to pension funds taking on a more significant role in the financing, delivery and operation of transportation infrastructure. This assessment is based on a case study of seven large Canadian pension funds, which have been at the forefront of a new wave of institutional investing in infrastructure. Drawing on key informant interviews with fund managers as well as an examination of annual reports, industry studies and media coverage, I illustrate how pension funds have specific characteristics that direct the types and locations of projects that they will invest in, as well as the models of deal structuring that are appealing. The results show that Canadian pension funds have focused primarily on investing in operational projects in established marketplaces, where they have demonstrated a willingness to assume traffic volume risk on projects that have demonstrated suitable demand in early operations.