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| Strategic Investment Funds
investors have a relatively stable partner in a SIF, with an open line to the government, which can be helpful especially at times of political leadership change. Table 2.6 provides a breakdown of more specific additionality that each of the case study SIFs seeks to provide. SIFs can play a role in countering government and market failures in the infrastructure sector. Many emerging market and developing economy governments lack the human capital to transform projects into bankable, fully documented projects that can be tendered to investors. With their in-house investment expertise, SIFs can complement the project preparation capacity of their host country. Senegal’s FONSIS (Fonds Souverain d’Investissements Stratégiques, or Sovereign Fund for Strategic Investments), for instance, acts as project developer in the infrastructure sector, unlocking a pipeline of strategic assets for other investors to co-invest. Especially in countries where they have not invested before, infrastructure funds can benefit from pipeline sharing agreements with SIFs. For example, Meridiam, a global infrastructure fund manager with
TABLE 2.6
The additional value of SIFs: Case study examples
SIF
MODE OF ADDITIONALITY
Asia Climate Partners
• Targets high-risk/frontier markets in Southeast Asia with limited private investment in green sectors • Takes greenfield projects with construction risk • Embeds ADB ESG standards; enhances credibility of portfolio companies
FONSIS (Senegal)
• Acts as project developer or codeveloper for greenfield projects • Provides demonstration effect on commerciality of projects with development impact • Intermediates between government and private investors
Ireland Strategic Investment Fund
• Has investment horizon that can extend to 25–30 years • Invests across capital structure—senior debt to start-up equity • Brings local presence and credibility as a sovereign-backed strategic fund
Marguerite Funds
• Focuses on actively developing new greenfield infrastructure projects • Has investment horizons of 20 or more years, providing tenors not supplied by market • Has local presence
National Investment and Infrastructure Fund (India)
• Demonstrates the feasibility and attractiveness of investing in Indian infrastructure through direct and indirect investment • Helps international institutional investors identify credible, professional local counterparts (for example, local developers) • Facilitates access to and dialogue with ministries and other government stakeholders in the infrastructure sector • Professionalizes infrastructure sector through investing with high-quality developers and facilitating knowledge transfer from foreign partners
Nigeria Infrastructure Fund
• Focuses on greenfield projects, including earlier-stage projects that require substantial involvement in design and development • Invests generally when there is a funding gap unfulfilled by private investorsa • Provides demonstration effect for innovative projects
Source: World Bank; see case studies in appendix A. Note: ADB = Asian Development Bank; ESG = environmental, social, and governance; FONSIS = Fonds Souverain d’Investissements Stratégiques (Sovereign Fund for Strategic Investments of Senegal); SIF = strategic investment fund. a. Marguerite also participates in competitive tenders.