One of the biggest unresolved questions in financial markets is how to mobilise institutional investors’ capital to fill the world’s biggest financing gaps, which are often found in emerging markets and especially in infrastructure. If the world wants to meet economic growth forecasts until 2030, it needs to invest the equivalent of Germany’s gross domestic product (GDP) in infrastructure every year, according to management consultancy McKinsey. But at $2500bn, today’s annual investment is $800bn short.
Risk-sensitive investment criteria have often stopped institutional investors from investing in emerging markets on any kind of scale. Co-investment platforms with multilateral institutions minimise risk, and China’s State Administration of Foreign Exchange (Safe) – which manages the country’s foreign exchange reserves – the country’s central bank and the State Oil Fund of the Republic of Azerbaijan (Sofaz) have pioneered co-investment funds between public institutional investors and multilaterals.
