The President-elect Donald Trump has big plans for infrastructure investment in America, which he claims will entail $1tn in investment over the next 10 years. According to Preqin’s Alternative Assets in Trump’s USA: Fund Managers Respond to Election Result, the majority (62%) of fund managers surveyed reported that Trump’s plan, “America’s Infrastructure First,” is likely to have a positive effect on the industry. The massive plan involves domestic investment in transportation, clean water, energy and telecommunications within a wide range of industries: steel, aviation, roads, bridges, tunnels, ports, waterways and pipelines, among others.
Trump’s plan also aims to attract new private infrastructure investment, which aligns well with current investor sentiment. According to Preqin Investor Outlook: Alternative Assets, H2 2016, the majority of investors have a positive perception of the asset class overall. Half of institutional investors surveyed plan to increase their allocations to infrastructure, as opposed to only 8% that plan to decrease it. Moreover, 59% of investors cited North America as the region that currently presents the best infrastructure investment opportunities. Uncertainty in the European market may also contribute to an increase in infrastructure investment in the US. Preqin Quarterly Infrastructure Update, Q3 2016 found that only 18% of investors targeted Europe-focused infrastructure investments in Q3 2016, compared with 30% in Q3 2015.
Despite investors’ increasing appetite and positive attitude towards infrastructure, key issues remain in the industry. The majority (53%) of investors reported that they were concerned about high pricing and valuations for infrastructure assets. Furthermore, 54% of investors surveyed cited that it is difficult to source attractive investment opportunities. Given Trump’s plan to leverage private capital, investors are very likely to see more investment opportunities in the future. Furthermore, the plan also involves creating new public-private partnership (PPP) opportunities, which could drastically lower the price burden on investors. PPPs can likewise attract newcomers who previously could not access the infrastructure asset class because of high barriers to entry.
Preqin’s Infrastructure Online currently tracks over 1,300 institutional investors in infrastructure that are targeting North America. So long as government interests remain aligned with those of investors, infrastructure investment in the US appears to be an attractive opportunity looking forward. Government support combined with an abundant investor base could result in a friendlier investment climate, which may ease investor concerns for the asset class.