Asia-Based Institutions Investing Directly in Infrastructure – April 2015

by Joyce Chee

  • 01 Apr 2015
  • INF

Preqin’s recent infrastructure press release revealed that as of the start of 2015, a far larger proportion of institutional investors were looking to make direct infrastructure investments than at the start of 2013. In 2014, 28% of investments in infrastructure assets involved a direct investment from an institutional investor, compared to 25% in 2013. Of all Asia-based institutions that are looking to invest over the next 12 months, a sizeable 32% will target direct assets. A significant 65% of these institutions seeking direct opportunities will focus solely on investments in the Asia-Pacific region, while 30% have an interest in global assets; a further 5% will target both North American and European infrastructure. 

Preqin’s Infrastructure Online service contains information on 161 Asia-based institutional investors that are actively making or considering direct infrastructure investments, representing 50% of the Asian investor universe. Of the 161 institutions, 37% invest exclusively in direct assets. Twenty-one percent have exposure to listed vehicles on top of their direct investments, while 42% of Asia-based investors gain access to the asset class via private fund investments and direct assets. This is unsurprising considering that unlisted vehicles help institutions gain exposure to a range of infrastructure assets, with this route to market being especially useful for those investors without the internal resources necessary to undertake direct investments. However, this trend seems to be changing as larger and more sophisticated institutions increasingly have the means and expertise to invest directly. A notable recent deal involving an Asia-based institution is the sale of Eversholt Rail Group to Cheung Kong Infrastructure Holdings for £2.5bn in January 2015. 

The Asian infrastructure market is dominated by government funding; however, private sector investments are gradually achieving greater participation. In Q1 2014, China took a big step in allowing private capital into its market by allowing bids for 80 infrastructure projects. Asian Development Bank, along with other partners, has helped the Philippine Government establish a public-private partnership (PPP) program, resulting in a number of projects in which the private sector has invested. A noteworthy deal from this PPP program is the Manila Light Rail Transit 1, which has Ayala Corporation, Metro Pacific Investments Corporation and Philippine Investment Alliance for Infrastructure as investors; the deal amounted to $1.4bn. Of the 161 Asia-based institutional investors, a sizeable 40% are open to PPP/PFI projects. 

Despite the joint efforts of governments, private capital and Asian Development Bank, there remains an infrastructure funding gap in Asia. However, China has taken the lead in the establishment of Asian Infrastructure Investment Bank, which can open up more direct infrastructure investment opportunities for the private sector. Asian Infrastructure Investment Bank has been steadily gaining partners over the past few months, with South Korea joining as its latest member.

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