In August 2013, Preqin surveyed institutional infrastructure investors from around the world to find out more about current investor sentiment towards the infrastructure asset class and the key issues facing the market, including what factors are deemed the most important when selecting a fund manager.
The highest proportion of participants surveyed (65%) are concerned about what impact impending regulations such as Basel III and Solvency II will have on the infrastructure market. Many fund managers and investors alike do not fully understand how these regulations will impact them, something that will hopefully become clearer in the coming 12 months. Fifty-four percent of investors highlighted both fund manager performance and the economic environment as being potentially problematic issues in the coming 12 months, while unsurprisingly, 50% of respondents are concerned with the level of management fees charged by fund managers, particularly those utilizing the private equity fund model. Investors have shown particular dissatisfaction with the level of performance fees paid to infrastructure fund managers, as well as the level of fund manager commitments to their own funds, with 43% of respondents viewing both of these areas as in need of improvement.
With the above in mind, 51% of investors surveyed feel that fund manager and investor interests are properly aligned. This figure has improved significantly from June 2010 when only 27% of investors surveyed believed that investors and fund managers shared the same interests. This demonstrates that although investors are becoming increasingly satisfied with their fund manager relationships, significantly more can still be done in this area.
A significant 94% of investors surveyed highlighted manager experience and background as a key factor when selecting infrastructure fund managers. Similarly, 87% of respondents look for fund managers with an established track record in the infrastructure space. However, because the infrastructure asset class is still relatively young, few fund managers are able to illustrate a strong history and track record in the sector. Other key issues highlighted by investors surveyed include the source of returns/strategy (77%), fees (72%), and returns (68%).