| The topic about basic endowment insurance fund has attracted social attention in the decades, because of its low yields. From2001to2011, China’s basic endowment insurance fund investment rate of return is negative, after deducting the inflation rate, this is because the investment instruments that can be chosen from are so few, just save at the bank or buy Treasury Bonds. There is another thing that should be paid attention to; it is as China has becoming an aging society, ensuring that the "old to rise" will be a complex problem in China. How to ensure the value of pension funds and how to increase its value will be the problems that the Chinese has to face.The key to ensure the value of pension funds is that creating the new investment instruments for them, so that can make mitigating the risks and increasing the value of pension funds become true. The investment instruments for pension funds in foreign countries are more than those in China. Such as:equity, bonds, private equity, real estate, infrastructure and so on. Since1990s, infrastructure has attracted pension funds manager’s attention; this is mainly because there are so many characteristics in infrastructure that can match with pension funds. The investment scale of infrastructure is large, and always needs huge initial investment. For example, the construction of the subway, the airport and the city infrastructure construction must be one-time huge input, because the intermittent sporadic investment often hit the desired results, and low efficiency. The time span for the construction of infrastructure and the investment payback period are always long, commonly4to8years; the assets can last for50years or even longer, so they are illiquidity. This requires that infrastructure construction should have stable and long-term capital source. Pension funds that can last for20to30years can provide stable capital for infrastructure. Infrastructure can form of stable and predictable cash flow and prevent inflation, so it is good for pension funds to maintain and increase their value. And many foreign scholars and invest institutions treat infrastructure as a separate asset, it can disperse portfolio risk if it is added to the portfolio. Therefore, the characteristics of infrastructure make it feasible for pension fund to invest in theory.In China, the main sources of financing for infrastructure are bank loans and financial budget, the leverage of infrastructure projects is always high. Limited funding sources, to some extent, limit the development of China’s infrastructure. China is now in the urbanization construction and twelfth five-year development period, the demand for infrastructure is large, so it needs the support of large sums of money that pursues profit to improve infrastructure construction and operation efficiency. So, we can find the fact that Chinese pension funds look for investment instruments and that infrastructure seeks financing source can well match. This paper explores the ways for Chinese pension funds to invest in infrastructure, based on the feasibility.This paper has seven chapters:The first chapter is the introduction, it explains that the purpose of this paper is try to find the new instruments for pension funds in order to ensure its value and increase its value, and to find out new financial sources for infrastructure; this study also has a comprehensive review of related literature home and abroad, gives research methods applied, its innovation and deficiencies.The second chapter is the infrastructure overview. It gives a detailed introduction of the definition, classification, features, functions for infrastructure construction, followed by an elaborate state on the interactive relationship between pension fund and infrastructure, and the advantages of pension fund investment in infrastructure.The third chapter is the theoretical basis of the pension fund investment in infrastructure. The main propose is to demonstrate that it is beneficial for infrastructure construction to promote economic growth; it is feasible in theory for pension fund to invest in infrastructure.The fourth chapter presents the vehicles of pension fund investment in infrastructure in foreign countries. There are several vehicles that pension funds can choose from when they invest in infrastructure. Such as, primary market vs. secondary market, equity vs. debt finance, direct investment vs. indirect investment, listed vs. unlisted companies, listed vs. unlisted infrastructure funds, domestic vs. international, single-sector vs. multi-sector.The fifth chapter presents the objectivity of China’s pension fund investment in infrastructure, based on the data, this paper analyzes China’s infrastructure deficit in the next few decades which needs huge capital. And China’s pension fund accumulation has been increasing year by year, but the investment instruments are so few, especially for the basic endowment pension fund, which can only save in the bank and buy Treasury Bonds, the investment rate of return is negative, after deducting the inflation rate in the last decades. This current situation requires that pension funds should seek new investment instruments.The sixth chapter presents in detail the investment vehicles that China’s pension funds can choose when they invest in infrastructure. They can invest in infrastructure bonds or infrastructure investment funds and can issue project loans.The seventh chapter presents the risks which exist in the process of pension funds investment in infrastructure. And then, from four aspects, which are risk assessment, risk control, risk protection and risk supervision, this chapter proposes the risk management strategies. |
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