EFTA01458603.pdf

Nor: Paittit41, Faro pt invatoncot toac flotos Amo..ltss pospoutoof panto Hein .orovicwo 404$ Long or short, Hamish Mackenzie? The Head of Infrastructure, Europe & Debt, looks at this interesting sector Are valuations for large unlisted infrastructure businesses rising? Can infrastructure investment be fully de-linked from political Ken Large. mature infrastructure businesses are currently risk? attractive investments for institutional investors and sovereign Business exposure to political developments can vary wealth funds seeking yield. This, combined with high levels of significantly from one country (and sector) to another. Such "dry powder" (available funds) in large, global infrastructure risk can have a particular impact on infrastructure-investment funds and some aggressive capital dep€oyment has pushed returns, as revenue here can be dependent on a government up valuations at the top end of the market, lowering implied contract or concession, or a regulatory framework. A mature returns. Investors may want instead to focus on medium-sized regulatory framework, supported by an independent regulator investments and more complex satiation, where there is less seen in some European core markets (e.g. the U.K.) - can offer competition for investment. a degree of protection from political events and thus greater visibility on investment returns. Full delinking of returns from Should Environmental, Social and Governance (ESG) issues political risk is not always possible but a detailed understanding always be considered? of regulation, developed through experience and often active gm Investment decisions that may result in environmental long-term relationships with regulators, as well as of the political or other social issues pose a reputational risk to investors economy of the host country. is fundamental and can help and ultimately to shareholder returns. The Deutsche Asset & mitigate such risk. Wealth Management Infrastructure team therefore evaluates potential ESG issues as part of risk management throughout Are megatrends important in the short term for infrastructure the investment process. These may cover a wide range of topics investment? from energy, water, emissions, and waste management to BEM Aide from technological change, several other labor and health & safety - and need to he considered across megatrends (for example involving social and environmental the whole investment lifecycle. so we can be confident about an change) are likely to influence infrastructure investment in the investment's longevity. medium to long term. But investors should he thinking about these factors now, due to the present-value implications of these Will new regulations impact European life insurance companies' longer-term trends. infrastructure investments? The introduction of Solvency II in 2016 will affect how M23 feixesenIc • positive Jreswer European life insurance companies consider infrastructure represent* o oopotivo on0vor equity as an asset class. Recently, the European Insurance and Occupational Pension Authority (EIOPA) proposed reducing Past performance is not indicative of future returns. capital charges for infrastructure investment, something which No assurance can be given that any forecast, investment could lead to insurance companies allocating more funds to objectives and/or expected returns will be achieved. Allocations infrastructure. There is still some uncertainty surrounding are subject to change without notice. Forecasts are based on Solvency II, as proposed regulatory requirements arc yet to be assumptions, estimates, opinions and hypothetical models that fully phased in, but we believe that the introduction of more may prove to be incorrect. stringent regulatory requirements is likely to further support, rather than discourage, these companies' investment in Offers and sates of alternative investments are subject to infrastructure. regulatory requirements and such investments may he available only to investors who are "Qualified Purchasers- as defined by the U.S. Investment Company Act of 1940 and "Accredited Investors" as defined in Regulation D of the 1933 Securities Act. Alternative investments may be speculative and involve significant risks including illiquidity, heightened potential for loss and lack of transparency. ..:016sw 1 Ono:at:Onion 2916 2r=z4,. 0 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0118586 CONFIDENTIAL SDNY_GM_00264770 EFTA01458603