Institutional investors are grappling with what the "wind blowing through geopolitics" means for global diversification of infrastructure portfolios, delegates heard at the IPE Real Assets Infrastructure & Natural Capital Global Conference in Rotterdam this week.
Following a keynote by geopolitics expert and author Tim Marshall, it was revealed that Dutch insurer NN Group had pulled away from making investments in US infrastructure as part of its growing exposure to the asset class.
Marieke van Kamp, head of private markets at NN, said the combination of EU insurance regulatory uncertainty and the dismantling of the Inflation Reduction Act (IRA) in the US, had prompted the insurer to pause on its intentions to invest in US renewables.
Uncertainty over how non-euro-denominated investments will be treated under EU Solvency II reforms, along with US policy changes relating to renewables, means NN "won't do anything for the moment", Van Kamp said, which is notable given "the size of the market".
However, speaking on the same panel, Brandon Soeiro, investment director for real assets at AustralianSuper, said the superannuation fund continued to see opportunities in the US.
AustralianSuper is looking to almost double its A$55bn infrastructure portfolio in the coming years, Soeiro said, and the US would continue to be a key market. "I don't want the room to think we have left the US and are only investing in Europe and Australia," he said.
Nick Langley, co-founder and senior portfolio manager at ClearBridge Investments, said the firm had reweighted its listed infrastructure investments at the beginning of the year.
"We shifted 10% of our portfolios out of the US and to Europe in in first quarter," he said, in part due to "a valuation issue" and also because the investment firm was "increasingly positive on Europe, and that turned out to be good trade".
Langley said the potential for an increasing trend towards what he called "national capital", where governments push or encourage institutional investors to invest more in their domestic markets would also be instrumental.
Van Kamp was asked whether potential changes to insurance regulations that would make it harder to invest in non-euro investments had a "political context behind" them. "The jury is still out" as to whether they will go through, she replied, but if they did, they would "focus the European insurers more to the European continent - and that was probably also the reason why it was put into the draft in the first place".
Earlier that morning, Marshall had explained how European governments now face the difficulty of balancing their spending on welfare states and defence, now that US military support was no longer a given.
Langley said increased European government spending on defence and infrastructure would create opportunities for investors.