Analysis of infrastructure financing by debt funds in the EU

Abstract

This article analyses the basic financial market conditions in the European Union (EU), which enable the emergence of debt funds. Using this foundation, the paper explains how and why infrastructure debt funds, specifically, are evolving in the EU. To this end, infrastructure is introduced as an asset class. The paper's main body is composed of a market overview as well as an analysis of optimal contractual design of infrastructure debt funds in the EU. However, in spite of the great euphoria associated with their introduction, debt funds will have to face regulatory challenges that could quickly lead to disillusionment among their supporters. A recently adopted EU law, the Alternative Investment Funds Managers Directive, is the basis for consistent EU-wide regulation of infrastructure debt funds. Thus, finally, debt funds are examined briefly within the regulatory framework of European financial markets. An outlook for the future and the proposal of additional research opportunities mark the end of this paper.