Infrastructure Fund Multiples Demonstrate Reliable Returns – June 2014

by Claire McNeil

  • 18 Jun 2014
  • INF

Infrastructure is an attractive asset class to long-term investors in particular, such as pension funds, insurers and sovereign wealth funds, given the asset class’ potential to deliver predictable, long-term cash flows, a hedge against inflation, low volatility and low correlation with other assets. The opportunities for infrastructure investment remain vast, resulting from the deficit between infrastructure spending and requirement.  However, regulatory, political and currency risk remain a key concern for many potential investors in the asset class.

Net multiples are used by investors to determine how much they have gained, or are likely to gain, on an investment. While it does not take into account the timings of capital call-ups or distributions, it does provide a good indication of fund performance. The median multiples for infrastructure funds are largely consistent across vintage 2006 and 2010 funds, ranging from 1.11x for vintage 2007 funds and 1.25x for vintage 2010 funds. Funds of more recent vintages demonstrate lower net multiples, with the median net multiple of vintage 2011 funds standing at 1x and the top quartile standing at 1.13x, however this is likely to improve as these funds mature. With net multiples remaining relatively consistent across vintage years, the asset class appears to deliver on providing reliable, predictable long-term returns.

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