Comparison of Infrastructure Performance by Vintage Year – December 2014

by Madeleine Stretton

  • 10 Dec 2014
  • INF

Despite being a relative newcomer to the alternative assets space, the infrastructure asset class has asserted itself as being able to provide long-term, stable cash flows, which can make it an attractive investment opportunity.

Using Preqin’s Performance Analyst online service, it is possible to compare the performance of infrastructure funds by vintage year. One such way to make a comparison is by examining the net multiples of infrastructure funds. This gives an indication to investors of how much they have gained, or are likely to gain, from their infrastructure investments.

As can be seen in the above chart, the oldest infrastructure funds have produced the highest multiples, with 2004 vintage funds producing a multiple of 1.73x and 2005 vintage funds just below at 1.38x. There is also a general decline in the multiple size when moving towards later vintages, with 2012 and 2013 vintage funds producing net multiples of 1.04x and 1.00x respectively.

The above results are consistent with what we would expect to see from the infrastructure asset class. Like all private equity funds, infrastructure vehicles have a lifespan of approximately 10 years, and therefore it is expected that they produce their highest returns towards the end of this time period. The relatively low net multiples for the newer funds are linked to the ‘J-curve’ pattern that individual funds follow, with lower returns in the early stages of the funds’ life cycle before producing higher returns as the funds reach maturity.

The relatively high returns produced by older vintage funds demonstrate the strong positive returns that investors are able to achieve from their infrastructure portfolios.

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