Study: Amid Burgeoning Popularity, Infrastructure Viewed As Distinct Asset Class Within Alt Space

(April 13, 2011) — With the burgeoning popularity of infrastructure investment, a new study by Deloitte has affirmed that the sector has gained sufficient influence to be seen as a separate and distinct asset class within the alternatives space.

The survey revealed that over the last 12 months, more than €20 billion ($29 billion) of private sector investment in infrastructure assets have been completed in Europe. According to Deloitte, infrastructure funds have become better able to raise new capital and invest existing committed capital, due to the growing number of fund managers entering the infrastructure market coupled with the changing approach of pension fund investors. Meanwhile, specialist funds will continue to lead the way on renewables and public private partnerships (PPP) and private finance initiative (PFI) infrastructure assets, the survey noted.

“The survey findings indicate a distinct market evolution,” James Riddell, infrastructure funds partner at Deloitte, said in a release on the survey of more than 30 fund managers from across Europe. “The infrastructure funds market has developed to be less reliant on highly leveraged structures for its returns. Rather the market has almost uniformly as a sector shifted focus back to core infrastructure assets that can deliver the stable secure long term cash flows desired by their traditional pension fund investors,” he said.

More specifically, according to research by the advisory firm, infrastructure fund managers are focusing their efforts on roads, rail, airports and ports, regulated gas, electricity and water utility assets.

Looking ahead, Deloitte believes that challenges from direct investors may result in consolidation in the sector.

A recent study by Preqin has provided further evidence supporting the uptick in infrastructure investment, particularly in Europe. Europe is leading the growth in cleantech unlisted infrastructure with public pension funds ranking as the most prominent investors, the firm showed. “The cleantech and renewable energy infrastructure market has grown significantly over the past seven years, especially between 2007 and 2008 when the number of completed deals more than doubled,” Elliot Bradbrook, Manager of Infrastructure Data, said in a statement. “It is unsurprising that the industry is particularly advanced in Europe; all governments are bound by the 20:20:20 agreement and are offering strong incentives for development of clean technology and renewable energy solutions,” she stated, referring to the European Union’s overall goal of reducing greenhouse gas emissions and energy use by 2020.