Increased Infrastructure Appetite amongst US Public Pension Plans

by Iain Jones

  • 18 Oct 2011
  • INF

Preqin is currently tracking 119 US-based public pension funds actively investing in infrastructure, a 32% increase on the corresponding figure in Q4 2010. There are also a further 23 US public pension schemes considering making a maiden commitment to the asset class.

In addition to the increase in the number of US public pension plans investing in infrastructure, the average amount of capital being committed to the asset class by these investors is also rising. US public pension plans, which have median assets under management of $5.4bn, currently maintain an average allocation of 1.95% of total assets to infrastructure, with an average long-term target allocation of 3.53%. While this is positive for infrastructure fund managers seeking capital from US investors, US-based public pension funds are still some distance from gaining a similar level of exposure as their European, Australian and Canadian counterparts.

In terms of geographic location (as classified by United States Census Bureau), the southern region accounts for the largest proportion of public pension plans investing in infrastructure, with 34% of such investors based in the south.  The western region is home to 27% of public pension plans, followed by the Midwest and Northeast with 23% and 17% based in each region respectively.

California hosts the most US-based public pension funds active in infrastructure (17), ahead of New York (9) and Maryland, Texas and Illinois (7). Unsurprisingly, California-based public pension funds also account for the highest proportion of total assets under management of all US public pension funds investing in infrastructure, representing 22.3% of the total. New York-based schemes are next accounting for 14.2% of total assets, followed by Florida-based investors with 6.1%.

When looking at US-based public pension funds by preferred route to market, there is a distinct preference for unlisted infrastructure fund commitments, with 99% of such investors investing via this route. Just 6% of US public pension plans invest via listed funds and 11% make direct investments in infrastructure assets. In terms of project stage focus, US-based public pension funds are more diverse. Brownfield assets and projects are the most popular, with 76% considering this type of exposure; followed by secondary stage (67%), and greenfield strategies (56%).

Notable US public pension schemes investing in infrastructure include Teacher Retirement System of Texas (TRS), which currently has around 1.3% of its $108bn in total assets under management allocated to the asset class. TRS looks to gain its exposure through commitments to unlisted infrastructure funds, although it has recently begun to consider making co-investments alongside fund managers. Other US public pension plans investing a significant amount of capital in infrastructure include Illinois State Board of Investment and Oregon State Treasury.

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