The results are in, and during the first quarter of the 21st century the biggest beneficiary has easily been the Asia-Pacific region. Growing dramatically in head count and economic might, with huge upgrades in infrastructure, urbanization and a burgeoning middle class, this step-change has lifted an astounding 1.1 billion people out of poverty, arguably the greatest human achievement in recorded history.
China has been the primary driver of Asia's economic growth this century, achieving middle-income status and becoming the world's second-largest economy. Goldman Sachs, a US investment bank, predicts China will surpass the US to become the largest economy by 2035, with India following in 2074. China is the single largest trading partner for many countries, including Australia, South Korea, New Zealand and Japan, and maintains competitive tax rates to support trade. Its corporate tax rate is 25%, lower than several G20 nations including Australia (30%), Japan (30%), Germany (30%) and Canada (28%), and the highest personal tax rate is 45%, comparable to other G20 countries like Australia, Germany, South Korea and UK but far lower than Japan (55%), Sweden (52%), Netherlands (49.5%) and others.
Due to significant economic growth the Asia-Pacific region faces continued need for infrastructure investment. The Asian Development Bank (ADB) estimates that $2.2 trillion per year is required from 2020 to 2030 to sustain growth, eliminate poverty, and address climate change. Without climate-related costs, $20 trillion, or $2 trillion annually, is still needed for power, transport, telecommunications, and utilities. Additionally, Asian Infrastructure Investment Bank (AIIB) President Jin Liqun emphasized “Asia needs at least $1 trillion per year [in infrastructure investment], every year for 10 years”.
Infrastructure serves as a significant economic multiplier, providing long-term benefits such as reduced delivery times and enhanced global connectivity, which boost competitiveness and living standards. For investors, private infrastructure markets offer stable, long-term returns due to the predictable revenue streams of projects with long lifespans, making them appealing for pension and retirement funds. Essential services in utilities and transportation ensure continuous demand, providing stability even during economic downturns. Infrastructure contracts often include inflation indexing, potentially increasing real value during inflationary periods. Additionally, infrastructure has low correlation with stocks, bonds, and commodities, offering diversification benefits and attractive yields compared to traditional fixed-income products. While these private-market assets are less liquid and classified as Alternative Investments, their yields often exceed those of publicly traded securities, contributing to their appeal.
Private-market infrastructure investments have gained popularity among major investors, including sovereign wealth funds from Singapore, Saudi Arabia, Abu Dhabi, and Norway, as well as pension funds like Japan's GPIF, Canada’s OTPP and Australia's AustralianSuper, along with insurers and reinsurers. In response, asset management firms have developed pooled infrastructure products, such as Managed Funds and Limited Partner structures, primarily for institutional or high-net-worth investors. Fees typically include a 1%-2% annual management charge and 10%-20% performance fees on profits, after the product originator deducts their applicable costs and expenses.
A 2024 article on Bloomberg, a financial data provider, reported Australia’s largest pension fund wants to put more money into private-market investments and further boost its exposure to overseas assets. “Now is a better time to put money into private markets than two or three years ago, when valuations were more expensive and deals were quite scarce”, AustralianSuper Chief Investment Officer Mark Delaney said on Bloomberg TV. Another 2024 Bloomberg article reported ART (Australian Retirement Trust), a pensions manager with more than A$300 billion under management, wants to lift the allocation to unlisted property and infrastructure assets over the next two years, and Chief Investment Officer Damian Graham said whilst it had been prioritizing equities over unlisted assets, private investments now held more long-term appeal.
Smaller companies are also taking up direct investments within the infrastructure sector under varying structures. Christian Lindberg, Managing Director of Hong Kong-based Talisman Infrastructure Partners, an infrastructure consultancy and owner-operator, said he’s fervently bullish on private markets in Asian infrastructure, noting direct investments provide superior transparency and returns for investors than aggregated third-party products. He explained, “If we zoom out for a moment, the Asia-Pacific region represents around 50% of humanity and 50% of global GDP. Most of these people are based in just two countries, India and China, however in economic terms, China’s GDP is still larger than the total from the rest of Asia combined, India, Japan, Indonesia, Korea, the whole lot. Therefore, any investors wanting to diversify their investment portfolio geography could allocate around 50% of their portfolio to Asia-Pacific. When we then take into consideration the faster rates of economic growth in Asia it’s a compelling argument for your portfolio to be overweight Asia, to capitalize on the faster economic prospects in the region, and particularly at its core in China.” He continued, “We’ve been based in Hong Kong many years and it’s always benefitted as the international legal and financial adaptor that connects China to the systems used in the rest of the world. It’s already today’s largest financial center, by many metrics, it has deep, well established finance and capital markets, employs the global business standard of English common law, has tax advantages as a Duty-Free zone, and we’re one of only four official offshore clearing centers worldwide for USD transactions, as designated by the US government. In terms of corporate profits and dividends, in 2024 China had roughly 17% of the world’s populace and Chinese companies pay approximately 16% of global corporate dividends, therefore a simply diversified equal-weight income portfolio should probably allocate 16% of capital to Chinese firms, or more if China’s faster economic growth is taken into account. By comparison, with around 18% of the planets people, Indian corporate payouts are estimated to range between just 1%-2% of global dividends at the moment, so would suggest a more modest portfolio exposure. And the Chinese aren’t just manufacturing jeans or widgets anymore, they lead the world in a number of R&D, patent registration and innovation fields.”
In fact, according to the Australian Strategic Policy Institute (ASPI) Critical Tech Tracker index -- a unique dataset that tracks 64 foundational technologies, by focusing on the top 10% of the most highly cited research publications over the past 21 years -- China is now the lead country in 57 of 64 technologies.
Operations Director at Talisman Infrastructure Partners, Anton Botha, lays out his firms’ latest mainland joint-venture partnership in collaboration with Cement producer Henan Cement Stone Group, to develop and operate a mid-sized limestone quarry project in H2 2025, “at Talisman our bespoke, Westernized approach - and what I mean is specifically targeting the operational efficiencies and sustainability KPIs on site - I think it's very well received, it’s taken on board. And for us, securing a joint-venture with Henan Cement Stone gives us exceptional access to a proven producing asset in a fundamental sector. It's a classic win-win situation, or pluralistic benefits as they say here. They get a badge of honor for bringing in foreign partners, helping fulfil the national drive for increasing western engagements and we get a modest stake in a great project, one we're confident will lead to further opportunities to diversify our partnerships in future. As we like to say, anything built is built of cement”. Mr Lindberg then continued, "China produces around 2 billion tons of cement each year, contributing approximately 2% of global CO2 emissions, so the Central Government has implemented several policies to reduce these emissions. Upstream initiatives include closing outdated, inefficient facilities and adopting new technologies, such as advanced material mixes and operational improvements at sites like the Jade Valley joint-venture". He added, "Access to high-quality reserves like ours helps, and so does being strategically located in the middle of a huge infrastructure market. The big systemic reductions mandated in CO2 emissions throughout the cement supply chain are well on track in China. The country leads in sustainable global patent applications for low-emission cement and clinker tech, they're setting records, and we're proud to contribute in reducing the industry's greenhouse gas emissions while creating jobs, and boosting the economy, productivity and infrastructure capacity."
"With emerging needs for essential infrastructure all over Asia and Greater China planned out to 2050 we strongly believe appeal for our integral, tangible businesses producing physical transactions in predictable non-cyclical industries will only increase in popularity, leading our asset values to rise in tandem," concluded Mr Lindberg.
ABOUT:
Talisman Infrastructure Partners has grown its advisory practice to become a proprietary owner and operator of infrastructure assets throughout Asia-Pacific. Our successful track record in the region is complimented by a pragmatic approach to applicable UN Sustainability Development Goal implementation. We're proud to deliver local partners dynamic expertise, insights and optimization for the prevailing strategies of today’s infrastructure market.
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