Project preparation. Many EMDEs lack the capacity to transform investible projects into actual transactions, which is a hindrance to PPP finance even where capital may otherwise be available. Empirical evidence in Asia and Africa shows that project preparation facilities are not effective in transforming investible projects into actual transactions. To accelerate the generation of project pipelines and the preparation and closure of PPP transactions, several EMDE governments are establishing infrastructure PPP project venture funds. For example, by identifying and working with financial and technical partners, Senegal's FONSIS is able to develop and structure strategic projects from initial sourcing through transaction close. The underlying aim is for the fund to be responsible for managing all stages of the preparation of PPP transactions until financial close. A PPP project venture fund may, after originating and structuring a project, be entitled to take an equity and/or mezzanine stake in the project's special purpose vehicle, representing the government's participation. The PPP venture fund would then have a direct incentive to generate viable and profitable projects. Such a fund can be set up either as a fully state-owned SIF, as a public-private (or hybrid) SIF, or even as a subfund or fund compartment within an SIF. FONSIS is an example of a fully state-owned SIF that includes a PPP venture fund function. The inclusion of the venture-financing function in a single fund (as opposed to a separate compartment) enables the government to capitalize on project preparation costs that the SIF at financial close converts into equity stakes, or into a cost refund or a success fee. 

Sourcing projects from national budgets. Since SIFs are partly or fully state owned, they have an opportunity to align their investment strategy with the identified economic development priorities of their country of operations, subject to project viability. The close relationship with the government makes it easier for SIFs to source their projects from national infrastructure master plans, line ministries of relevant sectors, PPP units, SOEs and public utilities, PPP studies performed by the government and development banks, other SIFs and SWFs, in addition to private developers (unsolicited proposals), commercial banks, and PE infrastructure venture funds. FONSIS is an example of this model. Sourcing projects from national development plans and other government-related project pipelines must not inhibit the ability of the SIF's manager to make fully independent viable investment decisions that will enable the SIF to attract private capital. An SIF established as an independent entity by an act of parliament may help to address this problem, as was the case for FONSIS. Legal independence of the SIF may also address an important challenge often faced by public investment units that are part of national treasuries. For these units, it may be difficult to offer staff benefit packages beyond those available through standard public sector salary regimes, as is necessary to attract and retain highly skilled investment managers from the private sector.