Investors in Infrastructure with Assets under Management of $1bn or Less – October 2014

by Brian Chung

  • 29 Oct 2014
  • INF

Preqin’s Infrastructure Online currently tracks 301 smaller institutional investors, those with assets under management of $1bn or less, currently investing in the infrastructure asset class. These investors have aggregate assets under management (AUM) of more than $125bn and on average allocate approximately 5% of total assets to infrastructure, below their average target allocation of 7%.

Investors in infrastructure with assets under management of $1bn or less commit capital to the asset class from different areas of investment portfolios. As shown in the chart above, the largest proportion of investors commit capital to infrastructure via an allocation to real assets (43%), with 25% of these institutions investing through an allocation to private equity. Approximately 19% have established separate infrastructure allocations, suggesting that infrastructure as an asset class has continued to grow in prominence as smaller institutions start setting aside capital specifically for investments in infrastructure.

Investing in the asset class via unlisted infrastructure funds is the favoured route to market of the majority of these smaller investors, with 86% doing so. Many smaller investors may lack the experience and resources necessary to invest directly, with fund managers often helping to bridge this gap and providing the necessary expertise. As such, only 7% of these institutions with $1bn or less in AUM utilize direct investments in the asset class. Investments in publicly listed infrastructure funds, including master limited partnerships (MLPs), are favoured by 23% of these smaller investors.

North America is the preferred market for infrastructure fund investments for 72% of these investors, with only 23% of investors targeting Europe-focused funds and 13% pursuing Asian-focused funds.  Funds which target investments in emerging markets and South America are utilized by 6% and 5% of these LPs respectively.

In the next 12 months, many of these smaller institutional investors will continue to commit capital to the infrastructure asset class. Rochester Institute of Technology (RIT), a $700mn university endowment, will commit to unlisted funds targeting the energy sector and will consider both existing fund managers in its portfolio as well as forming new GP relationships. In Ontario, Canada, Wilfrid Laurier University, a $505mn endowment plan, will commit up to CAD 20mn to new fund managers in the next 12 months.

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