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UK-Based Investors in Infrastructure – March 2014

by Jessica Hull

  • 13 Mar 2014
  • INF

Preqin’s Infrastructure Online database is currently tracking 222 active UK-based investors in the infrastructure asset class, representing 31% of the investors located in Europe and 11% of the total infrastructure universe. UK-based investors have an average current allocation to infrastructure of 5.5% and an average target allocation to infrastructure of 6.5%, which suggests that UK-based investors have capital available to increase their exposure to infrastructure opportunities. These investors have mean assets under management of €19bn.

Of these 222 UK-based investors, pension funds are the most active type, with 57% of investors being either public or private sector pension funds. Private sector pension funds are the most active single type of investor in the UK, with 34% of investors falling into this category. Universities Superannuation Scheme (USS) is one of the largest UK private sector pension funds, in relation to total assets under management that invests into infrastructure.  USS seeks opportunities within the UK via direct investments into infrastructure assets. As a result of the relatively competitive market in the UK, the private sector pension fund also looks for opportunities overseas, such as Australia. Other notable types of UK-based investors include wealth managers and asset managers, which represent 11% and 8% respectively.

Eighty percent of investors access the infrastructure asset class via unlisted infrastructure funds. This is the most common route to market for these UK-based investors, with 80% of investors accessing the asset class via this route, as a result of seeking a diverse and easier route to market, as well as a large number of investors still being fairly new to the infrastructure asset class. Nearly a quarter (24%) of these UK-based investors will invest via listed funds and one-fifth would consider making direct investments. Direct investments are commonly the least prominent route to market as it tends to be restricted to the larger firms, because unlike the smaller firms, they need access to a greater amount of capital to make such investments.

When analyzing the UK investor universe by preferred strategy, 91% of UK-based investors have a preference for primary infrastructure vehicles. There has been an increasing prominence in the number of investors in the infrastructure debt space. Thirteen percent of UK-based investors invest into this area either through commitments to debt funds or through project financing debt. The remaining make-up of the UK-based investor preferences include 11% investing in fund of funds vehicles and 4% in infrastructure secondaries funds. The majority of UK-based investors pursue a single investment strategy, however 33% will pursue multiple strategies to help diversify its investment portfolio.

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