In August 2012 Preqin interviewed 75 leading institutions in order to gauge their reasons for investing in infrastructure assets, determine whether their investments have lived up to expectations, and find out more about their plans for the long term. Thirty percent of investors interviewed were public pension funds and 9% were private sector pension funds. Thirteen percent of respondents were asset managers, 13% were insurance companies and a further 12% were banks. The remaining 23% of respondents included superannuation schemes, family offices, foundations, and sovereign wealth funds, among others.
These institutional investors invest capital in infrastructure opportunities for a number of reasons; a significant 69% of respondents look to infrastructure to provide portfolio diversification, while 52% use infrastructure as an inflation hedge and 45% invest in the asset class for portfolio stability. These reasons for investing have grown in importance, particularly since the global financial crisis, as investors look to establish more diversified and less correlated portfolios in order to reduce risk.
Twenty-seven percent of respondents invest in infrastructure to seek long-term returns; one investor summarized: “We look to infrastructure for a long-term, stable annual yield.” The asset class can allow investors to combine portfolio stability with the desire for long-term returns. Additionally, a significant 48% of respondents regard infrastructure as a return-seeking investment strategy similar to private equity and hedge funds.
Institutional investor interest in infrastructure assets looks set to continue over both the short and long term. A significant 58% of respondents expect to increase their allocation to infrastructure over the coming 12-24 months, a figure which rises to 62% over the long term. Thirty-eight percent of investors interviewed will aim to maintain their existing level of exposure in the next 12-24 months, while 36% plan to keep the same level of exposure over the long term.