The Prominence of Core Infrastructure – May 2014

by Stephen Yates

  • 19 May 2014
  • INF

Core sectors have long been a staple area within the infrastructure asset class for fund managers and investors. Core infrastructure, which generally speaking encompasses energy, telecommunications, transport and utilities, typically displays the strongest characteristics of the asset class, such as high barriers to entry and natural monopolies. Due to these assets having historically been the mainstay for fund managers, many have acquired valuable experience in this area, which enables them to execute deals efficiently and effectively.

Core infrastructure accounted for 81% of the 776 deals completed within the infrastructure asset class in 2013, and 79% of the deals completed in 2014 to date. Similarly, in 2012 and 2011, core infrastructure industries accounted for 74% and 77% of infrastructure deals respectively. It is unlikely that we will see a shift away from the prominence of core infrastructure in the near future, given the established nature of core assets within the asset class. With its continued prominence, demonstrable fund performance is available in these industries, making them a key preference for some investors. In fact, of the 148 unlisted infrastructure funds currently in market, 100 (68%) of these invest within core infrastructure sectors. Alinda Global Core Infrastructure Fund is an example of a core infrastructure fund; it invests in core sectors including energy and utilities throughout the US and globally. The fund is currently in market, having held a first close of $340mn in August 2012, and is seeking $3bn in investor commitments. In terms of investor appetite, of the 2,084 active investors tracked by Preqin Infrastructure Online service, 72% specifically target core infrastructure industries, highlighting the prominence of core infrastructure as an established area of investment.

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