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North America-Based Pension Funds Investing in Infrastructure – December 2013

by Charles Cisterino

  • 05 Dec 2013
  • INF

Pension funds remain significant investors in the infrastructure asset class and Preqin currently tracks 324 North American-based pension funds that invest in infrastructure. These LPs have aggregate assets under management (AUM) of just over $5tn. The most common route to market for North American-based pension funds is through commitments to unlisted funds, with 95% of investors targeting this strategy. Eleven percent of these investors will consider making direct investments, and 8% will invest via listed funds.  

North American-based pension funds have a mean current allocation to infrastructure of 2.9%, while their mean target allocation is 5.6%. In comparison, North America-based investors in the infrastructure universe have a mean current allocation to infrastructure of 3.9%, while the global mean target allocation is 6.2%.

These institutions source capital for infrastructure investments from a variety of different areas. Twenty-two percent of active North American-based pension funds investing in infrastructure maintain a separate infrastructure allocation, while 16% invest via a private equity allocation, 15% via real assets, 7% via general alternatives, and 2% via inflation-linked and opportunistic investment portfolio, respectively.

In terms of geographic focus, a significant 77% of North America-based pension funds will consider investing in North America, while 41% will target European infrastructure. A further 11% of these investors make Asian infrastructure investments, and 8% will target emerging market infrastructure opportunities. When looking at all North American investors in infrastructure, 73% favour investing in domestic infrastructure opportunities, 31% invest in Europe, 11% invest in Asia and 8% in emerging markets.

The largest North American-based investor in the infrastructure asset class by current allocation is the public pension fund Ontario Municipal Employees Retirement System (OMERS).  It has CAD 14.6bn currently invested in infrastructure opportunities, representing 24% of its assets. OMERS invests in infrastructure assets throughout North America and Europe, and generally invests between CAD 100 and 200mn per project.

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