The unlisted infrastructure fund industry has made impressive progress in the last decade, emerging from a niche sector within private equity to become what is widely accepted as a separate asset class. The current infrastructure fund investor universe is made up of different types of institution from 68 different countries, with 53% of investors having established a separate allocation to the asset class.
The unlisted infrastructure fundraising market has experienced rapid growth over the last five years. The current fundraising market features 105 direct funds, complemented by 11 infrastructure-specific funds of funds, and a burgeoning market for debt funds. However, if the unlisted fund industry is going to make a greater contribution to infrastructure project finance and the global infrastructure funding deficit, both infrastructure firms and investors must play their part to overcome the key issues that still hinder the development of the asset class.
One such issue is that of fund terms and conditions. The recent downturn in infrastructure fundraising has prompted investors to push for more favourable terms of investment. Historically, the orientation of fund terms has been biased towards fund managers, but investors are now in the position whereby they can redress the balance. Investors will continue to invest in unlisted infrastructure funds over the coming years, but investors and fund managers must accept that a compromise from both parties is crucial if the capital is to generate optimal but stable returns while contributing to the socioeconomic development of a region.
This blog in an excerpt from this year’s Preqin Infrastructure Review. To view more information on the 2010 publication click here.