OECD/IOPS Global Forum on Private Pensions Pension Funds and Infrastructure Investments: The Australian Case Ross Jones Deputy Chairman, Australian Prudential Regulation Authority

Infrastructure initiatives Positive impact on GDP Mechanisms to facilitate infrastructure investment Tax changes

Definitions Predictable cash flows Inflation linked Sustainable competitive advantage Low operating expenses as a percentage of revenue Long operating life ‘Essential service’ with low demand elasticity

The Australian infrastructure market 5% of assets under management allocated to infrastructure Consideration variation in % Preference for ‘brownfield’ over ‘greenfield’ Preference for regulated entities

Regulatory concerns Sole purpose test Pension funds as magic pudding Investment strategy around infrastructure Risk diversification?

Regulatory concerns Liquidity Valuation Problems with ‘greenfield’ investment

Regulatory concerns Governance Joint ventures and partnerships Political impacts Foreign jurisdictions

Disclosure principles for listed infrastructure Key relationships Management and performance fees Related party transactions Financial ratios Capital expenditure and debt maturities Foreign exchange and hedging Base case financial policy Valuations

The future Matching government and fund expectations Incentives and their cost