An earlier version of this piece appeared in Public Works Financing, for which Mr. Poole writes a regular column, © Robert W. Poole, Jr., 2008.
Published here September 2008.

Editor's Note | Introduction | An Alternative Source of Funding 
A Shift in Investment Thinking | Tax Implications Overlooked
Pension Funds in Australia and Canada | Construction Trade Unions in the US

Pension Funds in Australia and Canada

Pension funds in Australia and Canada have been expanding into good infrastructure investment opportunities for a decade or more. Indeed, the rise of Macquarie Bank as a major infrastructure investor was fueled by the needs of Australian pension funds to find suitable long-term investments in the 1990s. At that time, the Australian federal government was privatizing utilities such as electricity and telecommunications, while the state governments in New South Wales (Sydney) and Victoria (Melbourne) were turning to the private sector to develop new urban toll motorways.

Macquarie created a series of funds to enable the pension funds to participate in these new infrastructure investment opportunities. But the pension funds' appetite for infrastructure soon exceeded what was available in Australia. That led Macquarie to become the first provider of global infrastructure funds, among the first of which were Macquarie Infrastructure Group, MIG (toll roads) and Macquarie Airports (MAP).

Canadian pension funds were the next to move into infrastructure. The Ontario Municipal Employees Retirement System created a specialized company called Borealis to make such investments for it, and Borealis has made some $10 billion worth of infrastructure investments. The nationwide Canada Pension Plan Investment Board has $7 billion of such investments, and recently sought (unsuccessfully) to acquire 40% of the privatized Auckland International Airport. In mid-2007 the Ontario Teachers Pension Plan teamed with Victoria Fund Management to purchase 48% of the UK's Birmingham Airport.

Tax Implications Overlooked  Tax Implications Overlooked

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