Far East-Based Institutional Investors in Infrastructure – May 2014

by Joyce Chee

  • 28 May 2014
  • INF

The Far East region is home to 16 different countries in Asia; these include South Korea and also ASEAN countries such as Brunei, Cambodia, Malaysia and the Philippines. These Far Eastern countries vary in terms of economic and social development. While cities like Singapore, Tokyo and Seoul have advanced infrastructure, locations such as Indonesia, Myanmar and Vietnam, have prevalent infrastructure funding gaps which governments hope to ease with funding from the private sector. 

Far Eastern institutions make up a sizeable proportion (59%) of Asia-based investors which are active or are considering investments in the infrastructure asset class. Preqin’s Infrastructure Online service covers 158 institutional investors that are located in the Far East with an interest in infrastructure investments. Collectively, these investors hold $15tn in assets under management (AUM), which is approximately 65% of the AUM held by the overall pool of infrastructure investors based in Asia. These 158 Far East-based institutions have a combined allocation of $41bn to the infrastructure asset class. A noteworthy 76% of Far Eastern institutional investors have exposure to infrastructure via unlisted vehicles. Approximately half of the investor pool gains access to the asset class via direct investments, while 27% of Far-East-based institutions provide debt finance to infrastructure projects. Twenty-four percent of these institutional investors invest in listed vehicles.     

Japan-based institutions exhibit the strongest appetite for infrastructure investments; they account for 37% of the Far-East-based investor pool. Japanese pension schemes, which have been relatively traditional in their investments, are now under pressure to boost returns. With Government Pension Investment Fund taking the lead in making its maiden infrastructure investment in Q1 2014, the number of Japanese investors in the infrastructure asset class could potentially increase in the years to come. Twenty-seven percent of the institutional pool are located in South Korea, while Malaysia, Singapore and Thailand each constitute 8% of these Far East-based investors. Philippines-based institutions comprise 5% of the investor pool, while firms in Indonesia, Vietnam, Fiji and Brunei make up the remaining 7%. 

Pension funds are the most (21%) common among Far-East-based investors with an interest in the infrastructure asset class. This is unsurprising as Japan has the largest pool of pension schemes in Asia. Banks and insurance companies each comprise 19% of the institutional investor pool while asset managers and corporate investors account for 8% of these Far Eastern institutions. Seven percent of investors interested in infrastructure are investment companies while government agencies and sovereign wealth funds each make up 5% of the investor pool. 

In terms of strategy, 91% of Far East-based investors gain access to infrastructure via primary strategies. Forty-four percent of institutions invest through the debt strategy while secondaries and fund of funds are each favored by 5% of the investor pool. A majority (62%) of institutions located in Far East employ a single strategy for their infrastructure investments while the remaining 38% use multiple strategies, indicating their appetite for diversification across the asset class.  

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