How will the infrastructure sector develop in 2011? The issues that have affected the growth of the infrastructure market since 2009 will still apply in 2011. However, the positive environment of 2010 suggests recovery is well under way and this looks set to continue over the coming 12 months with a record number of infrastructure funds on the road and a return of institutional investor confidence.
There are currently 122 unlisted infrastructure vehicles in market targeting $85.8bn in capital commitments. Additionally, 11 infrastructure fund of funds are actively raising capital and a further two real asset fund of funds are also looking for investor commitments. In our June 2010 institutional investor survey, investors proved optimistic towards the infrastructure asset class with a significant 70% expecting to make infrastructure fund commitments in the following 12 months. The majority of these investors plan to invest on an opportunistic basis, but 26% expect to make multiple fund commitments.
Investors now have considerably more power when negotiating fund terms and conditions than in previous years, meaning fund managers will have to make sure their terms, especially those relating to management fees and carry structures, satisfy investors if they are to be successful in an increasingly competitive fundraising market. The resolution of these key issues will directly affect investor activity and therefore impact on future fundraising and deal flow.
As was the case in 2010, 2011 will continue to determine the future direction of the infrastructure asset class. Investor confidence is slowly returning to pre-crisis levels, although most investors will now likely follow a more conservative investment approach when committing to infrastructure funds. Therefore increased investor and fund manager interaction and cooperation is needed in order for the market to continue to grow.
This blog is an excerpt from this month’s Infrastructure Spotlight feature article. To sign up for this free monthly newsletter please click here For more information on unlisted infrastructure fundraising as a whole, please see how Preqin’s Infrastructure Online database can assist you.