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Trends Among North American Investors in Unlisted Infrastructure Vehicles – March 2014

by Charles Cisterino

  • 19 Mar 2014
  • INF

Institutional infrastructure investors such as pension funds, foundations, and university endowments, continue to commit the majority of their capital to the infrastructure asset class. The preferred route to market for these investors is through privately managed funds. Seventeen percent of infrastructure investors gain exposure through direct infrastructure asset purchases, while 10% invest in listed infrastructure vehicles. Over 91% of the 822 North American infrastructure investors that Preqin currently tracks on Infrastructure Online make commitments to private commingled funds. These LPs display some notable preferences in how they select their investments in the asset class. 

The investors which commit capital to infrastructure are typically large in terms of assets under management (AUM). Only 7.5% of investors in unlisted infrastructure funds have less than $200mn in assets. Many infrastructure investors have made commitments to just a handful of large managers. The five largest infrastructure managers, measured by total funds raised in the past 10 years, are Macquarie Infrastructure and Real Assets, EIG Global Energy Partners, Global Infrastructure Partners, Brookfield Asset Management, and Energy Capital Partners. Thirty percent of investors investing in commingled infrastructure funds have committed capital to one of these large managers in the past. 

Furthermore, separate account structures are less common among infrastructure investors than among investors in other asset classes, such as real estate. Only 3% of investors will look to gain exposure through separate account mandates with infrastructure managers and a further 2% would consider such separate accounts, but have not yet committed to one. In comparison, 10% of investors in private real estate funds invest in or would consider commitments to separate accounts. 

In terms of sector preferences, 77% of LPs in private infrastructure funds have expressed a preference for, or have previously made commitments to funds targeting the energy and utilities industries. These core infrastructure industries represent the majority of capital committed to the asset class. As we have explored in a past blog, The Prominence of Core Infrastructure, the monopolistic nature of the assets in these industries provides investors with stable returns at minimum risk. 

To summarize, investments in private infrastructure funds will continue to be an integral part of an LPs alternative investment portfolio and the majority of these investments will be through large, experienced managers that control assets in stable, income-producing industries.

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