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Pension Funds vs. Insurance Companies Investing in Infrastructure – October 2013

by Paul Bishop

  • 02 Oct 2013
  • INF

Pension funds and insurance companies make up a significant 44% of all active investors in the infrastructure asset class. They are particularly attracted to the long term investment horizons that infrastructure offers and the stable, inflation-adjusted returns that assets often exhibit. This blog examines how these two key types of investors stack up against each other using Preqin’s Infrastructure Online platform.

Public and private sector pension funds active in infrastructure have mean assets under management of $14.7bn, with public sector pensions having a significantly higher average of $21.3bn compared to private sector funds with $9.2bn. The majority of public and private sector pension funds active in the asset class are found in Europe and North America, with 88% located in these regions. Twenty-eight percent of pension funds access the asset class through a separate infrastructure allocation, whereas 72% invest via a general alternative allocation, a private equity or opportunistic bucket, as part of a real assets programme, or through an alternative capital allocation. In terms of route to market, pension funds overwhelmingly prefer unlisted infrastructure funds as their primary investment mechanism, with 94% investing via this route to market. Direct investment among pension funds accounts for 15% of the total number active whereas listed fund commitments are utilised by only 9% of active pension funds.

Looking at insurance companies, the average figure for assets under management stands at $95.8bn, significantly higher than that of active pension funds.  This larger AUM figure explains why a higher percentage of insurance companies access the asset class via direct investments, 25% compared to 15% for pension funds. The majority of insurance companies active in infrastructure are also based in North America and Europe (73%), similar to the pension fund universe. A similar proportion of insurance companies also invest via unlisted infrastructure funds, 90% compared to 94% of pension funds. Listed fund commitments are the least utilised investment mechanism for insurance companies, with only 8% of active insurers investing via this mechanism.

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