Home ListingMarch 19, 2015

Infra Managers Lose Ground to Asset Owners Going Direct

Infrastructure buyers are piling in more cash and, increasingly, ditching fund managers.<span style="line-height: 0;"> </span>

Reported by Featured Author

Institutional investors are gaining confidence in almost all aspects of infrastructure and deploying record capital, according to Preqin.

Average allocations to infrastructure were higher than ever at 4.3%, and the average target allocation also rose to an all-time high of 5.7%. Two thirds of those polled by Preqin said they plan to increase their allocation in the long term.

Investors were also more likely to buy infrastructure directly, Preqin found. More than half (56%) said they were prepared to buy individual assets, compared to 29% in 2012.

At the same time, the proportion of investors making use of unlisted pooled funds as a route to market fell from 91% to 65%.

Andrew Moylan, head of real assets products at Preqin, said pooled funds would remain an important part of infrastructure investing, even for those larger investors buying directly, as they will seek out specific regions or sectors they cannot access themselves.

“Fund managers looking to raise capital in 2015 will be doing so in a competitive market, and need to be able to effectively communicate how they can provide access to unique deals in order to successfully secure investor commitments,” Moylan added.

Despite the positive outlook in terms of capital allocation, the main concern by far for investors entering the market in 2015 was the availability of investment opportunities. Of those questioned by Preqin, 49% said this was their main concern, while 33% cited liquidity.

The last few months have seen several high profile collaborations between pension funds to pool resources and access infrastructure assets. The pensions for the cities of Manchester and London in the UK have raised £500 million ($745 million) to buy local assets, while a group of Swiss pensions have also collaborated to invest an initial CHF300 million in the asset class.

Eight Danish pensions pooled more than €1 billion for infrastructure in October, and a Swedish consortium including AP1, AP3, and Folksam announced this month that it is set to acquire local electricity supply network Fortum Distribution.

See the next issue of CIO Europe, out in April, for a look at whether infrastructure has the capacity to help pension funds hedge inflation.