Infrastructure-specific fund of funds are a growing and important niche within the unlisted infrastructure industry. They provide a route for small/new infrastructure investors to gain initial exposure to infrastructure assets, and for larger investors to diversify into new regions.
Preqin’s Infrastructure Online database currently features 50 institutional investors that have either made commitments to infrastructure funds of funds previously or are willing to do so in the future. 54% of these LPs are public and/or private pension schemes, 12% are insurance companies, while asset managers, endowment plans, superannuation schemes and government agencies each make up 6% of the total. In terms of geography, 78% of active investors in infrastructure fund of funds are located in Europe (20% based in the UK alone). 20% are based in the US, with the rest based outside of these two developed markets.
Les Retraites Populaires, a Swiss asset manager, is an example of an established direct infrastructure investor that will use infrastructure fund of funds to create a debut unlisted fund portfolio. The firm issued a tender for an infrastructure-specific fund of funds manager to handle a CHF 30 million infrastructure mandate in 2010; it could therefore make its maiden unlisted fund commitment this year. It will seek exposure to unlisted primary infrastructure funds with a global and diversified focus.
There are currently nine infrastructure-specific funds of funds on the road seeking an aggregate $3.3bn in capital commitments. Of these vehicles only three have held an interim close. Seven have a primary focus on Europe, one on the US and one is focused on Asia & Rest of World.