Infrastructure debt: where could be the best relative value?
October 08, 2025
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5 min
Why is infrastructure debt in Asia attractive versus a similar asset elsewhere in US or Europe?
We think at the moment in terms of infrastructure debt, the best relative value is found in Asia. And the reason for that is, through our global platform, we see all the transactions coming in throughout the world. And we think at the moment a lot of the transactions in developed countries are extremely competitive, lowly priced, difficult terms and conditions, friendly to the borrower. At the moment, in Asia, we're in a different type of market cycle, more conservatively structured, higher pricing. There's obviously sort of specific risks in Asia as well. But our view is that the risks in Asia are pretty much similar in holistic way to the risks that you'd face in Europe. And that's because the actual risks statistically historically have been different for default in developing countries. Default has normally been about country risk or specifically currency crisis. Whereas in developed countries it's been about taking market risk, taking structure risk.
Angus, being based in Hong Kong and covering a large region, what would you say in your view right now are the most or the least attractive countries to invest in infrastructure in developing Asia?
Well, I think the most attractive countries are the ones that have a vibrant pipeline. So I think what we're seeing is that India, particularly with the renewable sort of targets that it has set by government and the regulatory policies they put in place and the amount of investments going in there, we see a pretty big pipeline coming through there. And so that's a fairly attractive country to do business in at the moment from a project finance perspective. The other country that we see a big pipeline in is Malaysia. Already this year it's been sort of very active in terms of digital data centers. Malaysia is right next to Singapore and has quite a lot of renewable energy. And so a lot of the large data center sponsors are looking to do business in that country and, and reach easily into other countries in the region.
What we're talking about here is sort of investment grade Asia, but still viewed as developing. But those countries that are really developing where they actually haven't put any policies in place yet, any regulatory policies in place and it's difficult for us to, to enforce our security if we put a loan in place, those are the ones that we tend to avoid.
You spoke about regulatory risks and having the right legal framework in place. How worried should clients be about country risk?
In our view, the country risk at the moment is not as elevated in terms of political crisis, in terms of currency crisis, it used to be five, 10 years ago. We can see that political risk insurance has come down. But more than that, you know, what we do is project finance. And if you look at the statistics over last 40 years, project finance in Asia has pretty much the same default rate as any other part of the world.
Moody's themselves in, in the data that it provides, say that for project finance location is not correlated to recovery. So what we have is project finance being an international business, we can actually offshore a lot of the risk in a way we're talking about international sponsors that may own these assets and vehicles offshore. There are structures that we use where the accounts can be offshore. In some instances, we actually have the facility agreements in some of our loan documents. They're not onshore law, they're actually UK law or offshore law.
And I think, you know, more often than not, we're operating in project finance markets and sectors that there's a lot of track record and we've learned how to try and remove that risk as much as possible for the actual country.