Not only long overdue but vital for successful investment

In this month's interview, we speak with Thierry Déau, CEO of Meridiam, about the second research publication from the Meridiam/Campbell-Lutyens research chair at EDHEC-Risk Institute, which presents a pricing model for unlisted infrastructure equity investments, the major issues involved in data collection, the launch of the Long-Term Investors in Infrastructure Association (LTIIA) and future development of the infrastructure sector.

The second research publication from the Meridiam/Campbell-Lutyens research chair at EDHEC-Risk Institute, which presents a pricing model for unlisted infrastructure equity investments, was released in January. What are the most important points raised by this research in your view?

Thierry Déau:

The creation of academically-validated benchmarks for unlisted infrastructure investment is, in the view of Meridiam and Campbell Lutyens, not only long overdue but vital for successful investment in the future. The benchmark will help create a uniformity of approach for members of the global infrastructure community, enabling them to achieve better, and better value for money, projects that will benefit communities across the world. The benchmarks will enable more efficient and more sensitive investment. To meet such objectives, a well-defined valuation methodology was essential. This is what has been achieved by the research undertaken over the last year.

This mobilisation of investors around ESG issues has already been affecting ESG stock prices. Amundi’s thorough research has highlighted that the mass mobilisation of institutional investors in support of ESG has had a direct impact on the demand mechanism with a knock-on effect on price, resulting in higher performance.

As a result, we are seeing more specific demands around ESG. Impact investing, ETFs and green bonds are booming on the market because investors have seen the space for good returns on investments and the clear impact of these strategies.

One of the major issues raised by the research is data collection. What do you think are the key factors that will help to improve data collection?

Thierry Déau:

The key to data collection is the cooperation of members. There is a natural reluctance amongst some investors to give information on projects as they are sometimes concerned about client confidentiality, the additional burden such work may represent and also about giving away information to competitors.

This is completely understandable, but we are finding that by engaging with the members of the LTIIA we can strike a balance in that area, in particular by defining with Dr Blanc-Brude’s team at EDHEC a sensitively-tailored and parsimonious data collection framework. The LTIIA offers a valuable forum to discuss to what extent the data collection requirements are realistic. This is a key question to be addressed to ensure the sustainability of the data collection efforts.

Furthermore, by showing that releasing data now will help to create a better investment environment and better relations with financial regulators and procuring authorities in the long term we are able to persuade members to engage in this cooperation, and so allow them to improve their performance while achieving sustainable and long term infrastructure for communities globally.

You were involved in the launch of the Long-Term Investors in Infrastructure Association (LTIIA) in October. Could you tell us more about this association?

Thierry Déau:

The “benchmark project” was at the core of the creation of the LTIIA. Investors and financial regulators need clarity and transparency on the actual performance of infrastructure investments. This is why Meridiam and Campbell Lutyens, both founding members of the LTIIA, have decided to contribute the Research Chair at EDHEC Risk Institute to the LTIIA, which will, in turn, become a long term partner of EDHEC.

More broadly, both the public and private sectors will benefit from the emergence of an infrastructure investment industry voice, and so we therefore established the LTIIA in 2014, holding our inaugural meeting at the French Ministry of Finance. We will aim to share and promote best practices within the industry, through such initiatives as the creation of the benchmark, in order to provide policy-makers with an infrastructure investment industry entry point and to work towards creating conditions that will favour the long-term and sustainable financing of infrastructure.

As a leading global investor and asset manager specialising in public and community infrastructure, how do you see the infrastructure sector developing in the near future?

Thierry Déau:

Infrastructure investment is here to stay. The world faces urgent challenges as it copes with the large-scale demographic challenges presented by increasing populations in the developing world, increased urbanisation, and increasing life spans in the developed world. The one constant in all of this is that more infrastructure is needed; in schooling for the young, in transport for those earning, and in healthcare for those ageing. As the public sector gains familiarity with the private sector through the intelligent communication provided by pioneering initiatives like the LTIIA, we can reasonably expect to see an upsurge in the use of PPPs across the world. We believe that PPPs represent the best way for governments to attain value for money infrastructure that sits comfortably within its surroundings and communities. We plan on leading that movement to represent the private sector; it is an exciting and vital journey that we are undertaking. 

About Thierry Déau

Thierry Déau is founder and CEO of Meridiam, an independent long-term infrastructure investment fund, which he founded in 2005. The firm specialises in the development, financing, and management of long-term public infrastructure projects and currently manages $3.8 billion of assets, with investment in 40 projects to date. Meridiam is currently finalising a long-term pan-African infrastructure fund with a focus on greenfield projects, aimed at bridging the investment gap.

With offices in Paris, New York, Toronto and most recently in Istanbul, Meridiam is the leading investor in public infrastructure in Europe and North America. Designated Global Infrastructure Fund of the Year for the third time in 2012 (Infrastructure journal), Meridiam was also the first investor and asset manager to receive ISO 9001 certification for its responsible investment process.

Prior to founding Meridiam, Mr. Déau excelled in a broad spectrum of engineering and infrastructure disciplines. He started his career in 1993 at GTM International based in Malaysia, working as a site manager in the construction industry.

Mr. Déau then joined the Caisse des Dépôts et Consignations group, working in its engineering subsidiary Egis Projects. During this time, he held the positions of Project Director, Concessions Director and, in 2001, was appointed Chief Executive Officer. In this role, Mr. Déau reformed the company’s strategic and management structures, for the sub-group Egis Projects/Transroute International, which had a staff of 1,300. Under his management, the company achieved an ISO 9001-certified management structure, and launched new operating services including parking lots, electronic toll collection and user services. These developments allowed Egis to win multiple prestigious concession contracts globally in the transportation infrastructure sector. Mr. Déau was responsible for international projects on the Egis Group’s Executive Board, was a member of the Risks Committee, and held positions as board member and chairman for several of the company’s subsidiaries.

After leaving Egis in 2004, Mr. Déau spent a brief period as a Director at the world’s top engineering firm, AECOM Technology Corporation, before founding Meridiam the following year. Meridiam has operated with the support of AECOM since its inception.

In 2006 Mr. Déau obtained support for Meridiam from the Crédit Agricole group as a financial sponsor of the fund and, by the end of 2007, had raised around €600 million in funds for the company from a number of European institutions, including the European Investment Bank.

During his decade as CEO of Meridiam, Mr. Déau has focused tirelessly on a sustainable approach to ESG, capacity building, inclusive development, and performance measurement. In 2014, Thierry led the creation of the Long-Term Infrastructure Investors Association (LTIIA), aimed at establishing globally accepted best practices for long-term infrastructure investors, bringing the issues that have been at the heart of Meridiam’s business model to a broader sector. The LTIIA serves as an international industry champion, working closely with the public sector.