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Investors' Current and Target Allocations to Infrastructure - July 2012

by Paul Bishop

  • 01 Aug 2012
  • INF

The characteristics that attract institutional investors to the infrastructure asset class, such as increased portfolio diversification and long-term inflation-adjusted returns, are well documented.  However, various investor types have different liabilities to meet; these ultimately determine the infrastructure investment strategy adopted, or indeed whether the investor chooses to allocate to the asset class at all.  Preqin currently tracks over 1,600 active investors in the infrastructure asset class from over 25 different investor types, and the level of current and target allocations to infrastructure vary from type to type.

The average current allocation to infrastructure across the entire investor universe stands at 3.8% of total assets under management, with an average target allocation figure of 5.4%.  These figures indicate that active investors in infrastructure are, on average, under-allocated to the asset class and looking to make further investments in future in order to meet their target exposure.

Asset managers have the largest average current allocation to infrastructure of any investor type (6.8%), significantly above the average for the whole universe.  Asset managers have an average target allocation to infrastructure of 5.9%, and are therefore, on average, over-allocated to the asset class.  In addition to asset managers, endowment plans and superannuation schemes are also significant investors in infrastructure, with an average target allocation of 6.5% and 8% respectively.  On average, these institutions remain under-allocated to infrastructure, with endowment plans maintaining an average current allocation of 3.2% and superannuation schemes an average current allocation of 6%.  The majority of superannuation schemes are located in Australia and are experienced players in the market.

Public pension funds and private sector pension funds are the most active investor types in the market, representing 35% of the total number of investors in the sector.  However, both types currently stand below the industry benchmark in terms of average current and target infrastructure allocations.  While both investor types maintain a 2.8% current infrastructure allocation, private sector pension funds have a higher average target allocation of 5% compared to the 4.3% average held by public pension funds.

Family offices and foundations display similar characteristics to pension funds with a lower than average target allocation of 4.3% to infrastructure opportunities, and an average current allocation of 3.5%.  Insurance companies have the smallest allocations to infrastructure in terms of a percentage of total assets, although it should be noted that many of these institutions have more sizeable assets under management than other investor types.  Insurance companies maintain an average target allocation to infrastructure of 2.6%, and an average current exposure of 1.1%, which, again, is well below the industry average.

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