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Investment Preferences for North American LPs Committing to Infrastructure Funds - July 2014

by Brian Chung

  • 29 Jul 2014
  • INF

Preqin’s Infrastructure Online service currently profiles 123 North American institutions that will make commitments to infrastructure funds in the next 12 months. These firms have aggregate assets under management of more than $3.2tn, and on average currently allocate approximately 3% of total assets to infrastructure, below the average target allocation of 6%. Of these investors, 80% are located in the US, 19% are located in Canada, and 1% of these active LPs are based in Bermuda.

Of these investors, 54% will favour funds targeting North American assets, while 15% will seek opportunities in European assets. Interestingly, funds investing in infrastructure in emerging markets will attract 8% of these investors, while Asia-focused funds will draw approximately 6%. Unlisted funds targeting assets on a global scale will be favoured by 58% of these firms, as investors aim to diversify their investments in the asset class. In regards to strategy, a vast majority (96%) of these LPs will invest through a primary strategy. Two percent of investors will commit to infrastructure fund of funds vehicles, with debt/mezzanine and secondaries strategies targeted by 7% of investors each.

Firms with less than $10bn in assets under management account for more than half (59%) of those LPs which will make commitments in the next 12 months. Forty-one percent of investors planning to invest in infrastructure in the next year have more than $10bn in total assets. Seventy-three percent of these investors will exclusively commit to unlisted funds, and 23% will also aim to make direct investments in infrastructure. Exchange listed infrastructure funds will be targeted by 7% of LPs that will also make commitments in the next 12 months.

Investors planning to be active include the Colleges of Applied Arts & Technology Pension Plan, a $7bn private sector pension plan located in Toronto, which will commit to two to three primary funds in the next 12 months. The pension fund will commit between CAD 50mn and CAD 100mn ($47mn - $94mn) and target general infrastructure assets on a global scale. Another investor that plans to make new commitments in the next 12 months is the Boston City Retirement System, a $4bn public pension fund. The retirement system will commit to US-focused energy funds, and will consider forming new GP relationships.

This will offer encouragement for infrastructure fund managers as there are a large number of active investors which are looking to commit sizeable amounts of capital to move closer to their target allocations. North American investors are frequently targeting diverse portfolios and many LPs are looking to commit capital to funds investing in a variety of industries, and on a global basis.

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