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Top 25 North America-Based Private Sector Pension Funds Investing in Infrastructure – November 2014

by Samuel Malec

  • 25 Nov 2014
  • INF

Preqin’s Infrastructure Online service currently tracks 176 North America-based private sector pension funds investing in the infrastructure asset class. The top 25 private sector pension funds based in North America, by allocation to infrastructure, have aggregate assets under management of more than $785bn. On average, these 25 private pension funds have a current allocation of 6%, just below the average target allocation of 9%.

Out of these top 25 North America-based private sector pension funds, 13 are located in Canada. Of these Canada-based firms, 54% have established separate infrastructure allocations; Canada-based investors are among the most active in the world. One example of a Canada-based private sector pension fund investing in the infrastructure asset class is Colleges of Applied Arts & Technology Pension Plan. In the next 12 months, the pension fund will seek to commit between $50mn and $100mn to two or three globally-focused, unlisted infrastructure vehicles. The remaining 12 firms in the top 25 are US-based, with 50% having established separate infrastructure allocations. Of the top 25 North America-based private pension funds, 12% invest in infrastructure through their private equity portfolios, 4% through general alternatives allocations, 4% through inflation-linked assets and another 4% through their real assets allocation.

Future investments in the asset class will come through different routes to market. In the coming 12 months, 40% of the top 25 North America-based private sector pension funds look to make further commitments to the infrastructure space. Out of these firms, 60% will focus solely on unlisted funds, whereas the remaining 40% will consider both unlisted funds and direct investments.

Large private sector pension funds are also able to utilize economies of scale, which allows them to invest through different structures, including co-investments, given that it requires significant internal resources. Co-investments are utilized or considered by at least 32% of the top 25. Project finance debt has been utilized by at least 8% of the largest North America-based private sector pension funds investing in infrastructure. One such example of a large private sector pension fund investing through project finance debt and co-investment structures is TIAA-CREF. The $564bn pension fund allocates approximately $1bn per year to such infrastructure investments, primarily focusing on North American assets.

In conclusion, the top 25 North America-based private sector pension funds are, on average, under-allocated to infrastructure, and will continue to use their significant amounts of capital to fulfill their target allocations. For instance, Société de transport de Montréal, the $3.5bn private pension fund, will continue to seek new commitments to unlisted funds and direct infrastructure investments on a global basis in the coming 12 months, as it seeks to establish a greater presence in Asia. 

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