A true rise in the overall rate constellation would increase the attractiveness of other interest paying investments, and might hinder fund business, but not yet. Halcrow’s Mr Chandrasekhar raises another point:

“True, interest rates could go up, and  maybe debt coverage ratios might suffer, thereby reducing the free cash  flow generation potential of assets – but the private equity funds are seemingly less sensitive to this than the banks as the assets are auctioned off and the equity goes into syndication.”

Impacts, if any, of a rate rise, will be diffused and not felt instantly. Indeed, the headlong rush into “Infrastructure funds” continued with news of Citigroup’s Alternative Assets business launching an infrastructure fund. The androgynous nature of buyers (not clearly in either the financial or strategic camps) further muddies the waters. For example, does financial conglomerate AIG suddenly become a synergy-driven industry player, with investments now in Amports, following its initial investment in the DP World US properties?

Halcrow’s Mr Chandrasekhar tells Port Strategy:“These deals are big – in many cases, they need to syndicate because the investment requirements, and the resultant exposure, in a multi-billion dollar deal will exceed the threshold limits of a single fund.”

Nevertheless, cash generating port and terminal businesses, just like Real Estate Investment Trusts, and Master Limited Partnerships, need to keep a weather eye on US interest rates. For now, activity continues to boom and funds are raising money. But, volatile markets require an abundance of caution.

BARRY PARKER