Due to the relative youth of the infrastructure asset class, it is often difficult to gauge the performance of infrastructure investments. However, Preqin recently interviewed 75 leading institutional investors to gauge sentiment towards the infrastructure asset class and whether their investments in it have lived up to expectations. In terms of geographic location, 43% of respondents were based in Europe, 29% in North America and 13% in Asia. The remaining 15% of investors interviewed were based outside of these core regions, mainly in South America and the Middle East.
We asked investors to disclose whether the performance of their infrastructure investments have exceeded, met, or fallen short of expectations. A significant 71% of investors interviewed stated that their infrastructure investments had performed as expected, and a further 10% felt that their infrastructure returns had exceeded expectations. One North America-based bank commented: “As an investor in the asset class since 1998, the sector exceeded our expectations prior to 2007. Since then, returns have been more subdued, and the sector now is meeting expectations.”
However, 19% of respondents felt dissatisfied with the returns from their infrastructure portfolios. One North American public pension fund highlighted the difference in performance between higher and lower risk infrastructure strategies: “The private equity model in infrastructure has been disappointing, but the core/long-term model has delivered according to expectations.” Several other institutions commented that although infrastructure had not quite lived up to expectations, it had outperformed equities, which validated its inclusion in the portfolio.
Encouragingly, 78% of surveyed investors stated plans to make further infrastructure investments in the next 12 months, and just 9% do not expect to increase their exposure (13% remain undecided). Thirty-six percent of respondents plan to make multiple fund commitments in 2012/13 and a further 20% plan to make a single fund commitment. Thirty-four percent expect to pursue direct investment strategies in the next 12 months, while 30% will look to make co-investments. Nineteen percent of interviewed investors will operate an opportunistic investment policy.