The credit crunch may have dampened enthusiasm among investors, but PFI and infrastructure funds are proving a safe bet

An unexpected benefit of the credit crunch has been the realisation that PFI and infrastructure funds are among the most resilient of investment classes.

For years these funds, which hold equity stakes in some of the country鈥檚 most vital projects, have been dismissed by financiers as dull investments, a distant second to the excitement of mergers and acquisitions.

But in this turbulent market, PFI and infrastructure funds are the only things worth buying. This is because, with their assets already built and payments backed by the government, they are reliable and effectively risk free.

Take I2, the fund that holds stakes in 70 projects, ranging from a wastewater PFI in the Highlands to the 拢70m Docklands Light Railway extension to Lewisham, south-east London. The fund鈥檚 owners 鈥� a consortium of Barclays Private Equity, Soci茅t茅 G茅n茅rale and 3i 鈥� is set to put it up for sale for 拢850m by the end of next week, a premium of nearly 70% on the assets under I2鈥檚 management.

The sale has been slightly delayed by the credit crunch 鈥� NM Rothschild, the investment bank running the auction, originally wanted to start the bidding process by Christmas. But the expected asking price has not changed in that time. With the likes of Macquarie, the Australian banking giant, and the Ontario Teachers鈥� Pension Plan (ignore the quirky name, this bidder has a full piggy bank to break into) among those likely to submit offers, I2鈥檚 owners will get their price.

Contrast this with the protracted sale of Morrison, the former facilities and utilities services arm of the construction business now owned by Galliford Try. AWG has tried to offload the 拢700m-turnover business for 拢300m, but is unlikely to get much more than two-thirds that amount. Private equity bidders are the only ones left standing and neither they nor the banks backing them are willing to pay asking prices for low-margin, risky businesses since the credit crunch.

There will be winners and losers in 2008: what is certain is that infrastructure funds will be among the former.

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