Institutional Investors in Australian Infrastructure – February 2015

by Joyce Chee

  • 03 Feb 2015
  • INF

The Australian government’s 2015 budget features an asset recycling initiative which will incentivize states to sell secondary infrastructure assets on the condition that proceeds fund new greenfield projects. This in turn could create opportunities for institutional investors to invest in quality assets across the country. Australia has been a forerunner in privatizing infrastructure in the Asia-Pacific region; not only does the country encourage private sector involvement in the asset class, it also actively establishes public-private partnerships.

A notable deal involving the privatization of state-owned assets is the AUD 7bn sale of Queensland Motorways by state government investment arm QIC in April 2014. Queensland Motorways was acquired by a consortium comprising Transurban Group, AustralianSuper and Abu Dhabi Investment Authority. Last year, completed Australian infrastructure deals totalled over $38bn, compared to $12bn in Asia and $49bn in West Europe, indicating a healthy demand for Australia-based assets. Going forward, this demand seems set to continue; Victoria has started the process of selling the Port of Melbourne, while Queensland is considering the sale of power assets.

At present, Preqin’s Infrastructure Online service tracks 238 institutional investors that are interested in Australasia, of which Australia is the main market. A sizeable 88% of these firms gain access to the asset class via unlisted funds. Forty-nine percent of the institutional pool has exposure through direct investments, while 31% invest in listed vehicles.

Domestic firms exhibit the strongest appetite for Australian infrastructure investment, accounting for 42% of the investor pool. This is hardly surprising considering domestic institutional investors, of which a majority are superannuation schemes, allocate a significant proportion of their assets to infrastructure. Australia-based institutional investors have a combined allocation of at least $49bn to the infrastructure asset class. Additionally, Australia is home to prominent infrastructure fund managers such as Hastings Funds Management, Colonial First State Global Asset Management and AMP Capital Investors. These fund managers offer private open-ended vehicles, which appeal greatly to superannuation schemes. North America-based institutions make up 30% of the investors interested in the Australasia region, while Asia-based firms account for 18% of the institutional pool. 

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