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Infrastructure Investments in Asia-Pacific

by Ee Fai Kam

  • 08 May 2012
  • INF

Emerging Asia, particularly countries such as India, China and Myanmar, require significant improvements to national infrastructure as their economies grow. Preqin’s Infrastructure Online database shows that there are 250 active institutional infrastructure investors based in Asia-Pacific with mean assets under management (AUM) of USD 7.2 billion. On average, these investors have a current infrastructure allocation of 7%, and are seeking to fulfil an average target allocation of 10.3% to the asset class.

The majority of these 250 investors are located in Australia (39%), while Indian and Japanese institutions account for 13% and 12% respectively. Ten percent are based in South Korea while the same proportion can be found in Greater China. A significant Australian investor is AustralianSuper; it is the nation’s largest superannuation scheme by AUM and manages USD 45.5 billion in retirement benefits for about 2 million members. It allocates 11.6% to infrastructure. Eighty-nine percent of AustralianSuper’s infrastructure portfolio is invested in private funds and it has exposure to a globally diversified range of infrastructure assets in the aviation, clean technology, energy, healthcare, roads and telecommunications sectors.

In terms of route to market, 78% of Asia-Pacific investors invest in infrastructure via commitments to private funds, 49% make direct investments and 14% commit to listed vehicles. Greenfield assets are most popular with these investors; 72% of Asia-Pacific institutions have exposure to greenfield projects, 70% invest in brownfield assets while 62% prefer secondary assets.  This illustrates the growing need for greenfield development in emerging economies. One of Asia’s most influential investors is Asian Development Bank. The financial institution, with AUM of USD 85.7 billion, aims to reduce poverty in Asia and typically invests in greenfield and brownfield assets in countries where railway, road, port, water and waste management infrastructure are needed. It commits 88% of its infrastructure portfolio directly into projects, but also invests with fund managers through private vehicles.

Historically, 73 infrastructure fund managers based in Asia-Pacific have raised a total of 125 private infrastructure vehicles. Asia-Pacific-based managers are currently raising 30 funds, seeking an aggregate USD 17.2 billion in investor commitments. Interestingly, just as Australian and Indian institutions make up the largest proportion of Asia-Pacific investors, the same two countries produce the largest number of fund managers. 32% of Asia-Pacific infrastructure firms are based in Australia and 22% operate in India. Sixteen percent are Singaporean firms, 8% are located in Hong Kong, while Mainland Chinese, South Korean and Vietnamese firms each make up 5% of all Asia-Pacific managers.

Eighty percent of Asia-Pacific-based infrastructure firms have raised only one fund, while only 8% manage two to three funds and 12% have launched four or more vehicles. Energy ranks as the top sector that fund managers in Asia-Pacific invest in, with 63% indicating this to be one of their targeted sectors. Utilities and waste management combined come in second (51%) while transportation projects and renewable energy assets are comparable at 49% and 42% respectively.

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