China, India and Japan are Asia-Pacific’s largest three economies, representing three-quarters of the region’s total GDP and home to 64% of the region’s population. The three nations have, in recent times, made more efforts to increase infrastructure spending, as seen in Japan’s further commitment to the Asian Development Bank (ADB), India’s infrastructure policy amendments, and China’s establishment of the Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund.
Preqin’s Infrastructure Online service tracks 468 infrastructure investors based in Asia-Pacific, 169 of which are based in China, India and Japan. Collectively, these investors hold an aggregate $19tn in assets under management (AUM), averaging $111bn per institution. Comparatively, other Asia-Pacific-based investors have an average of $34bn in AUM.
Banks make up the largest proportion (22%) of infrastructure investors located in China, India and Japan; unsurprising given the traditional role these institutions have played in infrastructure financing. Infrastructure is a natural investment for investors that have long-term liabilities, given the asset class’s defensive and long-term attributes. This is reflected in noteworthy proportions of insurance companies (20%) and pension funds (12%) investing in the asset class.
In terms of how institutions in Asia-Pacific’s three largest economies access the infrastructure asset class, unlisted funds are the preferred route to market; 79% of investors in the region utilize this method, while approximately half invest through direct investments. An alternative route to market for institutions seeking direct exposure to infrastructure but lacking sufficient expertise or resource is through co-investments. Co-investments involve taking a direct stake in an infrastructure asset alongside a private fund; 62% of investors in the region participate in or will consider co-investment opportunities.
As shown in the chart above, equity strategies remain the most prevalent way to access unlisted infrastructure among investors in China, India and Japan. However, the proportion of investors utilizing primary strategies has declined over the course of the year, while proportions employing debt and secondary strategies have increased by 11 and four percentage points respectively since June 2014.