Preqin’s Infrastructure Online service tracks 161 North America-based public pension funds investing in energy-focused infrastructure. These investors have aggregate assets under management (AUM) of more than $3.8tn and, on average, allocate approximately 5% of total assets to infrastructure, below their target average of 6%.
As North America-based public pension funds look to fulfil target allocations to the asset class, many allocate capital from different areas of their portfolios. Among the investors based in North America investing in the asset class, 34% do so through an allocation to real assets. A considerable 30% of pension funds have established separate infrastructure allocations, and investors allocating through a private equity allocation account for 20%. US-based institutions investing through a general allocation to alternative assets represent 6% of these investors, while 10% commit capital to the asset class through other means, including allocations to inflation-linked assets or opportunistic investments.
North America-based public pension funds invest in energy-focused infrastructure through various routes to market. Unlisted fund commitments remain the key preference among such institutions, with 96% of investors choosing unlisted infrastructure funds as a route to market. Direct investments in infrastructure assets are utilized by 21% of investors and 24% invest in the asset class via publicly listed infrastructure funds. An overwhelming majority (94%) invest through primary strategies, while 19% choose to invest through debt and mezzanine strategies. A further 12% of investors consider fund of funds commitments.
Unsurprisingly, with regards to geographic focus, 90% of these pension funds target North America-focused energy investments, with European assets targeted by 53% of investors. Energy-focused infrastructure assets in emerging market economies and Asia were targeted by 12% and 16% of investors respectively.
In the next 12 months, many North America-based pension funds will target energy-focused investments. School Employees’ Retirement System of Ohio, for example, will work towards its target allocation of 5% and is planning to fulfil this target through North America-focused unlisted funds. Employees’ Retirement System of Rhode Island will commit capital to both unlisted and listed infrastructure funds, and will do so only through new managers.