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Comparison of Infrastructure Fund Performance with Other Private Equity Strategies – January 2015

by Madeleine Stretton

  • 30 Jan 2015
  • PE
  • INF

Infrastructure has established itself as an attractive asset class within institutional investors’ portfolios due to the low volatility of these funds and their low correlation with other asset classes. The prominence of unlisted infrastructure is seen to be growing year on year, with the assets under management of the infrastructure fund space reaching $296bn as of June 2014, compared to $231bn 18 months earlier.

Using Preqin’s Performance Analyst online service, it is possible to analyze the performance of infrastructure funds in comparison to primary private equity strategies.

As can be seen in the chart above, infrastructure funds with vintages between 2000 and 2005 have performed strongly, producing a median net IRR of 19.0, outperforming buyout, venture capital and private real estate funds, and demonstrating that infrastructure vehicles can provide strong returns over the longer term. However, 2007 vintage infrastructure funds have produced a much lower net IRR of 3.2%, with private equity real estate funds of this vintage year also producing lower returns of 3.0%, indicating that more generally, real assets vehicles of this vintage have struggled to perform strongly.

Infrastructure has underperformed compared to the other private equity strategies during more recent vintages, although it follows a similar path overall. The slightly lower returns for the asset class are typically expected given the lower risk/return profile of infrastructure funds, supporting the strategy of many investors that will invest in infrastructure in order to offset the risks associated with other asset classes. 

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