Reading Comprehension -Test 20

Directions : Read the following passage carefully and answer the given questions. Certain words are given in bold to help you locate them while answering same of the questions.

Infrastructure projects take a long time to build but they deliver cash flows over an EXTENDED period. Pensions funds have liabilities that stretch over several decades. Why not get the latter to finance the former? A new report from the Organisation for Economic Co-operation and Development (OECD) estimates that global pension funds have just 0.9% of their portfolios in pure infrastructure in part, that is to due the OECD’s decision to define infrastructure assets as unlisted debt and equity; pension funds have significant exposure to the listed shares and bonds of power companies and the like. From the point of view of public policy, however, the OECD’s definition is the correct one. The utility shares owned by pension funds are those of companies that were privatized in the 1980s and 1990s and the infrastructure they operate was the result   of government spending in the previous decades. Governments would like to see more infrastructure get built (thanks, not least to Keynesian stimulus that might result), they would not rather bear the whole burden. The difficult bit about infrastructure projects, apart from original decision to COMMISSION them, is the cost of construction i.e, where governments would like pension funds, and the rest of the private sector, to open the wallets.

Risk is clearly one important factor. Pension funds want reliable cash flows that can be used to pay retirees, not the uncertainties associated with projects. As the OECD points out, there is a “lack of objective high quality data on infrastructure investments”. This makes it difficult for funds to calculate how infrastructure would fit into their portfolios. Another problem is that small funds may lack the expertise to get directly involved in such large projects. They have to invest via an infrastructure fund, and pay a management fee for the privilege. The biggest infrastructure investors so far have been the giant Australian and Canadian pension funds, which can benefit from economies of scale. Britain is trying to achieve the same effect by setting a Pension Investment Platform which will pool infrastructure investments. However the scheme has been slow to get going – one person involved described it as like “herding cats”- and if it is successful it will not be sufficient to fund Britain’s highest profile project, a proposed high speed rail line. Additional problem includes the lack of political certainty. Capital spending is often the first item to be cut when governments run into budget difficulties and tough decisions are put off to suit electoral cycles. One possible solution is for Government to borrow a separate sum to finance infrastructure spending with the stated intention of selling assets to the likes of pension funds after a number of years. Such debts could be recorded separately in the National Accounts. An alternate option would be a national investment bank, along the lines of the European Investment Bank. It would borrow from the market and use its capital to guarantee the equity portion of infrastructure projects. That would allow pension funds to buy more secure debt elements of the project’s funding. The need is clear among the G – 7 countries. Only Italy is regarded as having worse infrastructure. And there is no shortage of potential funding – Britain’s pension assets are equal to 112% of GDP. Surely someone can put the two together. The Olympics showed that Britain can build projects on time when the country puts its mind to it.

Q.1 – Which of the following is the role of Pension Investment Platform?

Infrastructure projects take a long time to build but they deliver cash flows over an EXTENDED period. Pensions funds have liabilities that stretch over several decades. Why not get the latter to finance the former? A new report from the Organisation for Economic Co-operation and Development (OECD) estimates that global pension funds have just 0.9% of their portfolios in pure infrastructure in part, that is to due the OECD’s decision to define infrastructure assets as unlisted debt and equity; pension funds have significant exposure to the listed shares and bonds of power companies and the like. From the point of view of public policy, however, the OECD’s definition is the correct one. The utility shares owned by pension funds are those of companies that were privatized in the 1980s and 1990s and the infrastructure they operate was the result   of government spending in the previous decades. Governments would like to see more infrastructure get built (thanks, not least to Keynesian stimulus that might result), they would not rather bear the whole burden. The difficult bit about infrastructure projects, apart from original decision to COMMISSION them, is the cost of construction i.e, where governments would like pension funds, and the rest of the private sector, to open the wallets.

Risk is clearly one important factor. Pension funds want reliable cash flows that can be used to pay retirees, not the uncertainties associated with projects. As the OECD points out, there is a “lack of objective high quality data on infrastructure investments”. This makes it difficult for funds to calculate how infrastructure would fit into their portfolios. Another problem is that small funds may lack the expertise to get directly involved in such large projects. They have to invest via an infrastructure fund, and pay a management fee for the privilege. The biggest infrastructure investors so far have been the giant Australian and Canadian pension funds, which can benefit from economies of scale. Britain is trying to achieve the same effect by setting a Pension Investment Platform which will pool infrastructure investments. However the scheme has been slow to get going – one person involved described it as like “herding cats”- and if it is successful it will not be sufficient to fund Britain’s highest profile project, a proposed high speed rail line. Additional problem includes the lack of political certainty. Capital spending is often the first item to be cut when governments run into budget difficulties and tough decisions are put off to suit electoral cycles. One possible solution is for Government to borrow a separate sum to finance infrastructure spending with the stated intention of selling assets to the likes of pension funds after a number of years. Such debts could be recorded separately in the National Accounts. An alternate option would be a national investment bank, along the lines of the European Investment Bank. It would borrow from the market and use its capital to guarantee the equity portion of infrastructure projects. That would allow pension funds to buy more secure debt elements of the project’s funding. The need is clear among the G – 7 countries. Only Italy is regarded as having worse infrastructure. And there is no shortage of potential funding – Britain’s pension assets are equal to 112% of GDP. Surely someone can put the two together. The Olympics showed that Britain can build projects on time when the country puts its mind to it.

Q.2 – What is the author’s view of the OECD report on infrastructure?

Infrastructure projects take a long time to build but they deliver cash flows over an EXTENDED period. Pensions funds have liabilities that stretch over several decades. Why not get the latter to finance the former? A new report from the Organisation for Economic Co-operation and Development (OECD) estimates that global pension funds have just 0.9% of their portfolios in pure infrastructure in part, that is to due the OECD’s decision to define infrastructure assets as unlisted debt and equity; pension funds have significant exposure to the listed shares and bonds of power companies and the like. From the point of view of public policy, however, the OECD’s definition is the correct one. The utility shares owned by pension funds are those of companies that were privatized in the 1980s and 1990s and the infrastructure they operate was the result   of government spending in the previous decades. Governments would like to see more infrastructure get built (thanks, not least to Keynesian stimulus that might result), they would not rather bear the whole burden. The difficult bit about infrastructure projects, apart from original decision to COMMISSION them, is the cost of construction i.e, where governments would like pension funds, and the rest of the private sector, to open the wallets.

Risk is clearly one important factor. Pension funds want reliable cash flows that can be used to pay retirees, not the uncertainties associated with projects. As the OECD points out, there is a “lack of objective high quality data on infrastructure investments”. This makes it difficult for funds to calculate how infrastructure would fit into their portfolios. Another problem is that small funds may lack the expertise to get directly involved in such large projects. They have to invest via an infrastructure fund, and pay a management fee for the privilege. The biggest infrastructure investors so far have been the giant Australian and Canadian pension funds, which can benefit from economies of scale. Britain is trying to achieve the same effect by setting a Pension Investment Platform which will pool infrastructure investments. However the scheme has been slow to get going – one person involved described it as like “herding cats”- and if it is successful it will not be sufficient to fund Britain’s highest profile project, a proposed high speed rail line. Additional problem includes the lack of political certainty. Capital spending is often the first item to be cut when governments run into budget difficulties and tough decisions are put off to suit electoral cycles. One possible solution is for Government to borrow a separate sum to finance infrastructure spending with the stated intention of selling assets to the likes of pension funds after a number of years. Such debts could be recorded separately in the National Accounts. An alternate option would be a national investment bank, along the lines of the European Investment Bank. It would borrow from the market and use its capital to guarantee the equity portion of infrastructure projects. That would allow pension funds to buy more secure debt elements of the project’s funding. The need is clear among the G – 7 countries. Only Italy is regarded as having worse infrastructure. And there is no shortage of potential funding – Britain’s pension assets are equal to 112% of GDP. Surely someone can put the two together. The Olympics showed that Britain can build projects on time when the country puts its mind to it.

Q.3 – According to the passage, why is there a need for Britain to invest in infrastructure?

Infrastructure projects take a long time to build but they deliver cash flows over an EXTENDED period. Pensions funds have liabilities that stretch over several decades. Why not get the latter to finance the former? A new report from the Organisation for Economic Co-operation and Development (OECD) estimates that global pension funds have just 0.9% of their portfolios in pure infrastructure in part, that is to due the OECD’s decision to define infrastructure assets as unlisted debt and equity; pension funds have significant exposure to the listed shares and bonds of power companies and the like. From the point of view of public policy, however, the OECD’s definition is the correct one. The utility shares owned by pension funds are those of companies that were privatized in the 1980s and 1990s and the infrastructure they operate was the result   of government spending in the previous decades. Governments would like to see more infrastructure get built (thanks, not least to Keynesian stimulus that might result), they would not rather bear the whole burden. The difficult bit about infrastructure projects, apart from original decision to COMMISSION them, is the cost of construction i.e, where governments would like pension funds, and the rest of the private sector, to open the wallets.

Risk is clearly one important factor. Pension funds want reliable cash flows that can be used to pay retirees, not the uncertainties associated with projects. As the OECD points out, there is a “lack of objective high quality data on infrastructure investments”. This makes it difficult for funds to calculate how infrastructure would fit into their portfolios. Another problem is that small funds may lack the expertise to get directly involved in such large projects. They have to invest via an infrastructure fund, and pay a management fee for the privilege. The biggest infrastructure investors so far have been the giant Australian and Canadian pension funds, which can benefit from economies of scale. Britain is trying to achieve the same effect by setting a Pension Investment Platform which will pool infrastructure investments. However the scheme has been slow to get going – one person involved described it as like “herding cats”- and if it is successful it will not be sufficient to fund Britain’s highest profile project, a proposed high speed rail line. Additional problem includes the lack of political certainty. Capital spending is often the first item to be cut when governments run into budget difficulties and tough decisions are put off to suit electoral cycles. One possible solution is for Government to borrow a separate sum to finance infrastructure spending with the stated intention of selling assets to the likes of pension funds after a number of years. Such debts could be recorded separately in the National Accounts. An alternate option would be a national investment bank, along the lines of the European Investment Bank. It would borrow from the market and use its capital to guarantee the equity portion of infrastructure projects. That would allow pension funds to buy more secure debt elements of the project’s funding. The need is clear among the G – 7 countries. Only Italy is regarded as having worse infrastructure. And there is no shortage of potential funding – Britain’s pension assets are equal to 112% of GDP. Surely someone can put the two together. The Olympics showed that Britain can build projects on time when the country puts its mind to it.

Q.4 – Which of the following factors impact(s) investment decisions of the pension funds?

(A) Political uncertainty and financial risk
(B) Requisite expertise in infrastructure projects
(C) Returns on investment

Infrastructure projects take a long time to build but they deliver cash flows over an EXTENDED period. Pensions funds have liabilities that stretch over several decades. Why not get the latter to finance the former? A new report from the Organisation for Economic Co-operation and Development (OECD) estimates that global pension funds have just 0.9% of their portfolios in pure infrastructure in part, that is to due the OECD’s decision to define infrastructure assets as unlisted debt and equity; pension funds have significant exposure to the listed shares and bonds of power companies and the like. From the point of view of public policy, however, the OECD’s definition is the correct one. The utility shares owned by pension funds are those of companies that were privatized in the 1980s and 1990s and the infrastructure they operate was the result   of government spending in the previous decades. Governments would like to see more infrastructure get built (thanks, not least to Keynesian stimulus that might result), they would not rather bear the whole burden. The difficult bit about infrastructure projects, apart from original decision to COMMISSION them, is the cost of construction i.e, where governments would like pension funds, and the rest of the private sector, to open the wallets.

Risk is clearly one important factor. Pension funds want reliable cash flows that can be used to pay retirees, not the uncertainties associated with projects. As the OECD points out, there is a “lack of objective high quality data on infrastructure investments”. This makes it difficult for funds to calculate how infrastructure would fit into their portfolios. Another problem is that small funds may lack the expertise to get directly involved in such large projects. They have to invest via an infrastructure fund, and pay a management fee for the privilege. The biggest infrastructure investors so far have been the giant Australian and Canadian pension funds, which can benefit from economies of scale. Britain is trying to achieve the same effect by setting a Pension Investment Platform which will pool infrastructure investments. However the scheme has been slow to get going – one person involved described it as like “herding cats”- and if it is successful it will not be sufficient to fund Britain’s highest profile project, a proposed high speed rail line. Additional problem includes the lack of political certainty. Capital spending is often the first item to be cut when governments run into budget difficulties and tough decisions are put off to suit electoral cycles. One possible solution is for Government to borrow a separate sum to finance infrastructure spending with the stated intention of selling assets to the likes of pension funds after a number of years. Such debts could be recorded separately in the National Accounts. An alternate option would be a national investment bank, along the lines of the European Investment Bank. It would borrow from the market and use its capital to guarantee the equity portion of infrastructure projects. That would allow pension funds to buy more secure debt elements of the project’s funding. The need is clear among the G – 7 countries. Only Italy is regarded as having worse infrastructure. And there is no shortage of potential funding – Britain’s pension assets are equal to 112% of GDP. Surely someone can put the two together. The Olympics showed that Britain can build projects on time when the country puts its mind to it.

Q.5 – Which of the following is the main objective of the author in writing the passage?

Q.6 – Choose the word which is opposite in meaning to the word “EXTENDED” given in bold as used in the passage.

Q.7 – Choose the word which is most nearly the same in meaning to the word “COMMISSION” given in bold as used in the passage.

Infrastructure projects take a long time to build but they deliver cash flows over an EXTENDED period. Pensions funds have liabilities that stretch over several decades. Why not get the latter to finance the former? A new report from the Organisation for Economic Co-operation and Development (OECD) estimates that global pension funds have just 0.9% of their portfolios in pure infrastructure in part, that is to due the OECD’s decision to define infrastructure assets as unlisted debt and equity; pension funds have significant exposure to the listed shares and bonds of power companies and the like. From the point of view of public policy, however, the OECD’s definition is the correct one. The utility shares owned by pension funds are those of companies that were privatized in the 1980s and 1990s and the infrastructure they operate was the result   of government spending in the previous decades. Governments would like to see more infrastructure get built (thanks, not least to Keynesian stimulus that might result), they would not rather bear the whole burden. The difficult bit about infrastructure projects, apart from original decision to COMMISSION them, is the cost of construction i.e, where governments would like pension funds, and the rest of the private sector, to open the wallets.

Risk is clearly one important factor. Pension funds want reliable cash flows that can be used to pay retirees, not the uncertainties associated with projects. As the OECD points out, there is a “lack of objective high quality data on infrastructure investments”. This makes it difficult for funds to calculate how infrastructure would fit into their portfolios. Another problem is that small funds may lack the expertise to get directly involved in such large projects. They have to invest via an infrastructure fund, and pay a management fee for the privilege. The biggest infrastructure investors so far have been the giant Australian and Canadian pension funds, which can benefit from economies of scale. Britain is trying to achieve the same effect by setting a Pension Investment Platform which will pool infrastructure investments. However the scheme has been slow to get going – one person involved described it as like “herding cats”- and if it is successful it will not be sufficient to fund Britain’s highest profile project, a proposed high speed rail line. Additional problem includes the lack of political certainty. Capital spending is often the first item to be cut when governments run into budget difficulties and tough decisions are put off to suit electoral cycles. One possible solution is for Government to borrow a separate sum to finance infrastructure spending with the stated intention of selling assets to the likes of pension funds after a number of years. Such debts could be recorded separately in the National Accounts. An alternate option would be a national investment bank, along the lines of the European Investment Bank. It would borrow from the market and use its capital to guarantee the equity portion of infrastructure projects. That would allow pension funds to buy more secure debt elements of the project’s funding. The need is clear among the G – 7 countries. Only Italy is regarded as having worse infrastructure. And there is no shortage of potential funding – Britain’s pension assets are equal to 112% of GDP. Surely someone can put the two together. The Olympics showed that Britain can build projects on time when the country puts its mind to it.

Q.8 – Which of the following can be inferred in the context of the passage?

Infrastructure projects take a long time to build but they deliver cash flows over an EXTENDED period. Pensions funds have liabilities that stretch over several decades. Why not get the latter to finance the former? A new report from the Organisation for Economic Co-operation and Development (OECD) estimates that global pension funds have just 0.9% of their portfolios in pure infrastructure in part, that is to due the OECD’s decision to define infrastructure assets as unlisted debt and equity; pension funds have significant exposure to the listed shares and bonds of power companies and the like. From the point of view of public policy, however, the OECD’s definition is the correct one. The utility shares owned by pension funds are those of companies that were privatized in the 1980s and 1990s and the infrastructure they operate was the result   of government spending in the previous decades. Governments would like to see more infrastructure get built (thanks, not least to Keynesian stimulus that might result), they would not rather bear the whole burden. The difficult bit about infrastructure projects, apart from original decision to COMMISSION them, is the cost of construction i.e, where governments would like pension funds, and the rest of the private sector, to open the wallets.

Risk is clearly one important factor. Pension funds want reliable cash flows that can be used to pay retirees, not the uncertainties associated with projects. As the OECD points out, there is a “lack of objective high quality data on infrastructure investments”. This makes it difficult for funds to calculate how infrastructure would fit into their portfolios. Another problem is that small funds may lack the expertise to get directly involved in such large projects. They have to invest via an infrastructure fund, and pay a management fee for the privilege. The biggest infrastructure investors so far have been the giant Australian and Canadian pension funds, which can benefit from economies of scale. Britain is trying to achieve the same effect by setting a Pension Investment Platform which will pool infrastructure investments. However the scheme has been slow to get going – one person involved described it as like “herding cats”- and if it is successful it will not be sufficient to fund Britain’s highest profile project, a proposed high speed rail line. Additional problem includes the lack of political certainty. Capital spending is often the first item to be cut when governments run into budget difficulties and tough decisions are put off to suit electoral cycles. One possible solution is for Government to borrow a separate sum to finance infrastructure spending with the stated intention of selling assets to the likes of pension funds after a number of years. Such debts could be recorded separately in the National Accounts. An alternate option would be a national investment bank, along the lines of the European Investment Bank. It would borrow from the market and use its capital to guarantee the equity portion of infrastructure projects. That would allow pension funds to buy more secure debt elements of the project’s funding. The need is clear among the G – 7 countries. Only Italy is regarded as having worse infrastructure. And there is no shortage of potential funding – Britain’s pension assets are equal to 112% of GDP. Surely someone can put the two together. The Olympics showed that Britain can build projects on time when the country puts its mind to it.

Q.9 – What does the author want to convey through the phrase ‘They would rather not bear the whole burden?’

Infrastructure projects take a long time to build but they deliver cash flows over an EXTENDED period. Pensions funds have liabilities that stretch over several decades. Why not get the latter to finance the former? A new report from the Organisation for Economic Co-operation and Development (OECD) estimates that global pension funds have just 0.9% of their portfolios in pure infrastructure in part, that is to due the OECD’s decision to define infrastructure assets as unlisted debt and equity; pension funds have significant exposure to the listed shares and bonds of power companies and the like. From the point of view of public policy, however, the OECD’s definition is the correct one. The utility shares owned by pension funds are those of companies that were privatized in the 1980s and 1990s and the infrastructure they operate was the result   of government spending in the previous decades. Governments would like to see more infrastructure get built (thanks, not least to Keynesian stimulus that might result), they would not rather bear the whole burden. The difficult bit about infrastructure projects, apart from original decision to COMMISSION them, is the cost of construction i.e, where governments would like pension funds, and the rest of the private sector, to open the wallets.

Risk is clearly one important factor. Pension funds want reliable cash flows that can be used to pay retirees, not the uncertainties associated with projects. As the OECD points out, there is a “lack of objective high quality data on infrastructure investments”. This makes it difficult for funds to calculate how infrastructure would fit into their portfolios. Another problem is that small funds may lack the expertise to get directly involved in such large projects. They have to invest via an infrastructure fund, and pay a management fee for the privilege. The biggest infrastructure investors so far have been the giant Australian and Canadian pension funds, which can benefit from economies of scale. Britain is trying to achieve the same effect by setting a Pension Investment Platform which will pool infrastructure investments. However the scheme has been slow to get going – one person involved described it as like “herding cats”- and if it is successful it will not be sufficient to fund Britain’s highest profile project, a proposed high speed rail line. Additional problem includes the lack of political certainty. Capital spending is often the first item to be cut when governments run into budget difficulties and tough decisions are put off to suit electoral cycles. One possible solution is for Government to borrow a separate sum to finance infrastructure spending with the stated intention of selling assets to the likes of pension funds after a number of years. Such debts could be recorded separately in the National Accounts. An alternate option would be a national investment bank, along the lines of the European Investment Bank. It would borrow from the market and use its capital to guarantee the equity portion of infrastructure projects. That would allow pension funds to buy more secure debt elements of the project’s funding. The need is clear among the G – 7 countries. Only Italy is regarded as having worse infrastructure. And there is no shortage of potential funding – Britain’s pension assets are equal to 112% of GDP. Surely someone can put the two together. The Olympics showed that Britain can build projects on time when the country puts its mind to it.

Q.10 – According to the passage, which of the following can be said about infrastructure investment?

(A) It provides tremendous opportunities to investors as there is a huge need for infrastructure.
(B) Creative solutions are required to generate the necessary investment.
(C) It is crucial for governments to invest in infrastructure to win elections.