In a speech, Menon said that the MAS is establishing a pool of brownfield regional project finance loans from banks into a collateralised loan obligation (CLO). Insurance companies, pension funds, and other institutional investors can invest in this CLO.
MAS will also help create investment benchmarks to make infrastructure an investable asset class, which will “allow investors to compare the returns of privately-held infrastructure debt and equity against other asset classes,” Menon was quoted as saying by the Singapore Business Review.
Furthermore, MAS is developing platforms to facilitate online trading of infrastructure bonds, given Singapore’s status as one of the “choice destinations” for the issuance of bonds.
“Singapore’s bond market has been growing at a compound annual growth rate of around 9% over the last five years to reach US$243 billion,” Menon added.
These moves seek to increase and diversify the funding of infrastructure projects in the region, 90% of which is currently shouldered by governments. Private sector investors have been mostly reluctant to fund infrastructure.
“Asian insurance companies and pension funds are not as savvy as their counterparts in the US,” a project finance banker told Reuters. “Project finance bonds for brownfield assets have been few and far between, so a project finance CLO is going to take longer to see the light of the day.”