Blog

Fund Performance: Is Infrastructure Living Up to Expectations?

by Elliot Bradbrook

  • 18 May 2010
  • INF

The direction the infrastructure asset class will take in the future remains uncertain.  Investors and fund managers continue to debate over the most appropriate fund structure to satisfy both parties, with the relatively short-term private equity fund model conflicting with the long-term nature of infrastructure assets. The question also remains as to the role the private sector should take in the funding of public infrastructure projects through PPP/PFI initiatives. Also, with few infrastructure funds raised prior to 2004, there is only limited data available to create meaningful performance benchmarks for the industry.

Preqin currently holds performance data for 72 unlisted infrastructure funds, the majority of which have been raised in recent years. However, using the new Preqin Infrastructure Benchmark, we can begin to analyse the performance of older infrastructure funds for an indication as to what investors can expect from younger funds, and to make comparisons with other private equity strategies.

As expected, median net IRRs for the most recent vintage years remain around the 0% mark.  Many of these funds still have dry powder available to invest and/or contain relatively immature assets. Infrastructure funds with a vintage 1993-1999 have yielded a respectable 11% median net IRR, which increases to 15.8% for funds of vintages 2000-2004. This shows that older infrastructure funds have performed positively, and in line with investor expectations. 

This blog is an excerpt from this month’s Infrastructure Spotlight feature article.

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