In-Kind Infrastructure Investments by Public Pensions: The Queensland Motorways Case Study

Abstract

OECD countries require billions in infrastructure investment for new projects and the rehabilitation of old assets. Public pensions are likewise underfunded and in need of stable, inflation-linked investment opportunities uncorrelated with the rest of their portfolio, making infrastructure a seemingly strong fit. This has led to calls to facilitate more direct investment by public pension funds in infrastructure. In truth there are many impediments to such programs. Under the right policy and institutional conditions, however, direct public pension investments can yield considerable value for taxpayers and retirement beneficiaries alike, in part by overcoming the market inefficiencies and valuation problems inherent to infrastructure investment. This paper uses the case of a toll road network in Queensland, Australia to examine the potential for direct public pension investments in infrastructure. In 2011, the Queensland Government transferred a 40-year concession to operate Queensland Motorways to the Queensland Investment Corporation (QIC) – a government-owned company that manages that state’s defined benefit public pension.