A large part of the unlisted infrastructure fund industry is made up of core-plus infrastructure funds looking for core infrastructure assets in need of some degree of enhancement, for example through the modernization, expansion or development of existing infrastructure facilities and services.
Preqin’s new strategy data shows that core-plus funds make up 34% of infrastructure funds closed since 2008 – the largest proportion among infrastructure strategies – and have collectively secured the largest sum of institutional capital ($150bn, 37%). Five of the 10 largest funds closed over the same period employ a core-plus strategy, further illustrating the strategy’s dominance in the market.
The capital raised by these vehicles is largely focused on developed markets with sizeable concentrations of established operating assets: 50% of aggregate capital raised since 2008 was secured by core-plus vehicles primarily focused on North America, and 40% was raised by funds focused on Europe.
Historically, core-plus strategies have dominated the unlisted infrastructure fundraising market, but in recent years, funds focused on value added investments have had the most success. Value added funds that reached a final close in 2017 secured $21bn, the highest annual amount of capital raised by vehicles focused on this strategy in the past decade. This has contributed to the rapid increase in assets under management of value added funds in the past decade, with their share of industry assets rising from 8% in December 2007 to 20% in June 2017. As unlisted infrastructure becomes more common in investors’ portfolios, and with fierce competition among GPs for core-plus assets, fund managers are likely to continue to target assets outside these areas in search of relative value.
Nevertheless, there remains a strong pipeline for fund managers to secure more capital for core-plus assets: as at January 2018, 33% of unlisted infrastructure funds in market are primarily targeting core-plus assets, with these vehicles collectively seeking $39bn (32% of all institutional capital targeted).