From a recent infrastructure investor survey it is apparent that investors are increasingly reluctant to agree to a “2 and 20” fee model for infrastructure funds. This has already started to impact fund terms, which show a very wide spread in key aspects like the basic management fee. One-third of funds have a fee close to 2%, but a significant proportion of funds operate with lower fees, with 10% of funds operating with management fees of less than 1%, and 21% of funds having fees of less than 1.5%.
It has been well documented that infrastructure fund management arms of KKR and Blackstone have restructured the management fees of their unlisted offerings to try and attract investor commitments. Infrastructure GP’s must now accept that many potential investors in their fund will also consider alternative investment routes, such as publicly traded companies or joining ad hoc investment consortia, to fulfill their target allocations to the infrastructure asset class.
With only two unlisted infrastructure funds reaching a final close so far in 2010, the indications are that we will see more fund managers announcing amended fee structures for their funds that are already on the road seeking capital.
The full research report with the detailed findings of the survey can be found here.