North America-based public pension funds figure prominently among large infrastructure investors worldwide. Within this group, public pension funds in the US and Canada differ significantly in their appetite for infrastructure investments, and their preferred route to market within the asset class. On average, Canada-based public pension funds have a greater appetite for infrastructure than their US counterparts. As of Q1 2014, US public pension funds, which invest in infrastructure, had an average current allocation of 1.9% and a target allocation of 4%. On the other hand, Canada-based public pension funds had an average current allocation of 5.9% and a target allocation of 8%. Stated simply, Canada-based public pension funds on average plan to invest more, and actually do invest more than their US counterparts.
These two groups also differ in their preferred route to market within infrastructure. 90% of Canada-based public pension funds and 99% of US public pension funds invest in private commingled infrastructure funds, a comparable figure. However, Canada-based public pension funds are more likely to make direct investments in infrastructure, as opposed to only investing in unlisted or listed fund structures. 45% of Canada-based public pension funds which have invested in infrastructure committed directly to infrastructure projects, whereas only 16% of their US counterparts did so.
Direct investments tend to require larger capital commitments from the investor than investments in commingled funds, and a greater degree of specialist knowledge on the part of the investor. Several large public pension funds in Canada have in-house teams dedicated solely to direct infrastructure investments. Notable among these is Ontario Teachers’ Pension Plan, which owns a 48% stake in Birmingham International Airport. Ontario Municipal Employees’ Retirement System has a wholly-owned subsidiary Borealis Infrastructure, which makes a myriad of direct investments worldwide.