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Infrastructure Fund Performance vs. Other Private Equity Strategies - September 2014

by Madeleine Stretton

  • 10 Sep 2014
  • INF

Within the alternative assets space, infrastructure funds are still a relatively new asset class compared to other long-standing private equity strategies. Infrastructure has typically targeted lower returns than private equity and real estate funds, while correspondingly carrying lower risk. Using Preqin’s Performance Analyst, we can examine the median net IRRs by vintage year for infrastructure and see how these compare to the primary private equity strategies.

When examining funds with vintage years between 2006 and 2011, Preqin’s data reveals that 2009 and 2010 vintage funds are generating the highest median net IRRs for the infrastructure asset class at 11.1% and 11.9% respectively. However, buyout, venture capital and real estate funds of the same vintage years are also performing strongly. All three fund types outperformed infrastructure within the 2009 vintage group, and 2010 vintage buyout and real estate funds also returned higher median net IRRs.

Within the infrastructure asset class, 2007 funds are generating the lowest returns, with a median net IRR of 3.0%. However, 2007 real estate funds have also suffered, returning an IRR of the same figure. Infrastructure funds have typically been more consistent performers than real estate funds, with the latter experiencing significant swings in its median net IRRs between vintage years. For example, 2009 vintage real estate funds returned a median net IRR of 15.9%, compared to 2006 vintage funds which returned 0.6%.

Yet, although infrastructure marginally underperforms compared to buyout, venture capital and real estate funds, it has presented itself as a relatively consistent performer which is an attractive trait for many institutional investors.

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