When it comes to private investment in infrastructure, the framework conditions are crucial. Max Wirsching, Head of Private Capital Solutions at KfW, and Frank Dornseifer, Managing Director at the Bundesverband Alternative Investments, agreed on this point at the recent Börsen-Zeitung Private Markets Week.

Dornseifer hits the nail on the head when he says that "so far, we don't have a success story here.“ By this he refers to the fact that German institutional investors tend to invest in infrastructure abroad, but not in Germany. However, he is optimistic that this reverse „home bias“ will change in the future.

Dornseifer is critical of the fact that until fairly recently it was difficult to set up infrastructure funds in Germany. There has been poor regulation and an unfavourable tax regime, and these circumstances negatively affected investors. Unbalanced regulations within the framework of special funds prevented them from investing in infrastructure projects in the form of partnerships, rendering investments unattractive. In addition, he points out that there is a lack of suitable projects.

Wirsching also emphasises that some investors, such as foundations, insurance companies, and pension funds, first need to be introduced to new asset classes. However, there is a lot of international capital looking to find its way to Germany. In his view, a huge competitive disadvantage compared to Luxembourg as a fund location has now been eliminated – the abolition of sales tax on management fees. This is because Germany as a fund location must be aligned with Germany as an investment location. „This is much more important than government investment programmes", he says.

He points out that many investors want to reduce their dependence on China and the US, which makes Germany more attractive as an investment destination, provided „we do well and offer stability.“

Verena Kempe, Head of Investment Management for public and private markets at the state fund for financing nuclear waste disposal (Kenfo), noted that the infrastructure Special Fund has generated a lot of interest. „Germany must now seize the momentum“, she said, and create concrete opportunities to accompany this with return-based private investment. Pension fund reforms must now be promoted.

Germany has to make the most attractive investment opportunities, in competition with other countries. In addition, Germany could take a cue from its European neighbours, she noted, since Kenfo has invested in infrastructure projects in Italy and the United Kingdom that could serve as models.

According to Dornseifer, the Savings and Investments Union reforms in the EU are „not the big game changers.“ Instead, it is important „that the reduction of bureaucracy in the EU is taken seriously, and that processes are simplified.“ If the framework is right, the investments will come on their own.

Helaba Executive Board member Christian Alexander Schmid pointed out that the integration of infrastructure is particularly important in modern real estate development. „This applies to digital equipment, transport links, and energy supply,“ said the manager, who is responsible for real estate finance, asset finance, portfolio management, and real estate management. In real estate development, it is also particularly important to follow „ambitious climate paths“ by, for example, considering circular concepts for building materials as well as e-charging infrastructure.

Schmid cited lengthy approval procedures as a major obstacle to real estate and infrastructure development. „We need to become much faster,“ he stressed. Despite accelerated planning, approval and implementation processes (Bau Turbos), the gap between demand and available housing is immense. In view of the considerable financing requirements for real estate and infrastructure, he emphasised that „senior loans will remain the backbone of financing.“ However, he added that additional financing instruments are needed to be prepared for the future.

In his keynote speech, former rail network manager and current investor and multi-supervisory board member Alexander Doll emphasised that despite substantial government debt of officially around 65% of gross domestic product, there is a significant investment backlog in essential infrastructure investments.

This is particularly evident at the municipal level, where Doll estimates a backlog of 215 billion euros, mainly in roads and schools. „This leaves plenty of room for private investment.", he said.

No one knows exactly how much the energy transition will cost, and here too a large part of the burden lies with the municipalities. Their role „is central,“ as the KfW Municipal Panel report shows. Doll also lamented the lengthy approval process. A rail network takes twelve to 20 years from planning to implementation.

Due to long planning phases, little private capital is invested in many areas, which need faster planning procedures. Since municipal investments have so far involved hardly any private capital, the opportunities here are „huge,“ says Doll. He proposes more public-private partnerships (PPPs) to tackle municipal needs. Such cooperation between the public and private sectors to fulfill public functions is possible in areas such as transport, administration, and education, and is therefore consistent with municipal tasks. The share of PPPs is still very low compared to debt as a percentage of GDP.