Carillion-style crash impossible to predict, says infrastructure investor

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

Gravis’s latest Global Diversified Infrastructure fund, which is aiming to raise £200m when it floats on 3 April, will invest in projects across the world in order to mitigate such risks which may occur in one country.

“Things do come round and bite you – over any long term investment horizon, shocks do occur,” said Gravis’s chairman Stephen Ellis.

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

Discussing whether there was any way to foresee a crash like that of Carillion when investing in particular projects – infrastructure investor Hicl took a £50m hit when the contractor went bust – Ellis was doubtful.

"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," he said.

"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."

Gravis's new vehicle will invest in other funds to take advantage of local managers’ expertise, and will look at projects ranging across the US, Canada, Europe and Australia.

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

With a pipeline of more than £500m of opportunities already, according to Gravis, the cash raised through the public float should be invested within eight months.

The firm currently has £2.3bn in assets under management across three London-listed funds and two investment companies, two of which are focused on UK infrastructure.

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