Infrastructure Investor: There’s No Way to Predict the Next Carillion-style Collapse

Gravis, an investment firm, which is preparing to float a new infrastructure fund in London, has said that there is no way to predict another collapse that is like that of Carillion, the construction firm.

The latest Global Diversified Infrastructure fund of Gravis is aiming to raise £200m when it floats on the 3rd of April. It will invest in projects across the globe in order to mitigate such risks which may happen in one country.

Stephen Ellis, the chairman of Gravis, stated: “Things do come round and bite you – over any long term investment horizon, shocks do occur.

“In our view, the only way of mitigating the dangers of such black swan events is wide-ranging diversification.”

Talking about whether there was any way to predit a crash that is like that of Carillion when investing in projects – Hicl, an infrastructure investor, took a £50m hit when the contractor collapsed– Ellis was doubtful.

He stated: “Carillion was a listed player of some significance. You can look at their books but 10 years ago when Hicl, or Hicl’s predecessor, was looking towards their contracts there was no sign of a pension deficit.

“No matter how effective your due diligence process, things inevitably when you’re looking at 30-year cash flows can turn around and surprise you.”

The new vehicle of Gravis will invest in other funds to take advantage of the expertise of local managers and will look at projects that are ranging across the United States, Europe, Australia, and Canada.

It will also be diversified by sector, mainly focusing on accommodation, energy generation, regulated utilities, and transport.

According to Gravis, with a pipeline of over £500m of opportunities already, the cash that is raised via the public float should be invested within eight months.

The company currently has £2.3bn in assets under management across three funds that are listed in London and two investment companies, two of which are focused on infrastructure in the United Kingdom.