2024-08-01 12:57:38
Without infrastructure, the world would stand still. With the help of special funds, private investors can now invest in billion-dollar projects. About opportunities and risks.
The world is more connected than ever. Power lines, data cables, server farms, nothing works without them. The electricity for this should increasingly come from renewable energies. Photovoltaic parks and wind turbines must be expanded for this. Traffic on roads and rails must also keep moving. Modern societies cannot afford traffic jams on the motorways.
The ecosystem behind it is called infrastructure. It has to be built, maintained and expanded. Such facilities cost billions and the money has to come from somewhere. Until the beginning of the year, it was only large investors who could invest in such projects. From January 2024, private investors will also be allowed to get involved – in so-called Eltifs: European Long Term Investment Funds.
In an interview with t-online, Robin Binder, financial expert, founder and managing director of the investment platform NAO, explains what Eltifs are and how investors can participate in large infrastructure projects. Such an investment is not entirely risk-free – but there are also opportunities.
t-online: Eltif sounds like a complicated abbreviation. What does it mean?
Robin Binder: Eltif stands for European Long Term Investment Funds. These have been around since 2015 and, thanks to the EU regulation of January 10, 2024, are also a great investment opportunity for private investors. The market for infrastructure projects, real asset investments and venture capital, which was limited to institutional investors, has thus been opened up to private investors.
Robin BinderCEO and founder of NAO, previously worked for Unicredit Bank for several years and later built up the family office Zeitgeist Group and Zeitgeist X Ventures. With his multi-asset platform NAO, he enables investments starting at 1,000 euros in areas such as private equity and hedge funds, accessible via an app. NAO thus also offers private investors access to previously inaccessible investments.
Eltifs themselves are not funds, but a framework, a kind of stamp that you can get for your funds. The motivation behind them is to strengthen the economy in Europe by making it easier for private capital to access illiquid investments.
Sounds complicated. What does that mean?
There are three main areas: infrastructure, private equity and private debt. Take a share as an example. Private equity, i.e. a capital investment, is not that far from it. If Nvidia, SAP or Allianz were not listed on the stock exchange, they would also fall under the term private equity, i.e. a private capital investment by institutional and private investors.
Private debt, i.e. external financing, is the counterpart to a bond. Here, too, the focus is on financing companies – or states in the case of government bonds – through private capital.
While investors can buy stocks and bonds on the stock exchange, private equity investments are possible through private equity funds, funds of funds or listed private equity companies. These funds pool the capital of several investors and then invest it in various projects and companies.
Only the investments in infrastructure are something new.
Can you give examples of infrastructure projects?
Examples of infrastructure projects include photovoltaic parks or wind turbines. Power lines, railways, fiber optic cables, highways or data centers can also be included.
You speak of illiquid investments. What do investors need to know about this when they get involved in infrastructure projects?
Illiquid investments are investments in infrastructure projects, for example, where the capital is tied up over a longer period of time. It therefore takes a while before investors can realize potential profits from the capital. Illiquid investments are typically associated with long-term projects such as real estate development, private equity or venture capital.
And what is the great opportunity if I, as an investor, have to do without my money for such a long time?
The great appeal of Eltifs is that they can bring stability to the portfolio. They allow you to decouple your investment from the capital market to some extent. If the capital market falls, you cannot protect yourself from a loss in value in the asset class, no matter how broadly you are positioned. But you can invest in alternative investments that have a very low or even negative correlation with the capital market.
A simple example: The Corona crisis in spring 2020 really messed up the markets. Hardly anyone knew what would happen next and whether everything would work the way it once did. In stark contrast to infrastructure projects, which are declared to be necessary services for daily life.
Do you think that an investment in Eltifs can withstand any crisis?
It may sound strange in light of the crises, but the sun is shining and the wind is still blowing. In concrete terms, this means that photovoltaic parks and wind turbines will produce electricity despite geopolitical crises and thus generate stable cash flows. The same applies to fiber optic cables that transport large amounts of data from A to B. They also continued to be used while the coronavirus spread. After the pandemic, we even saw a boom in the construction of new data highways.