EFTA Document EFTA01458603

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