Institutional investor allocations to infrastructure will “grow dramatically” over the next decade, either as a standalone asset class or as part of a broader real assets allocation. This is the conclusion reached by Altius Associates, a London-headquartered private equity and real assets firm.
A new report entitled “Infrastructure as part of a global investment portfolio” predicts that institutions, which currently have an average 1 percent dedicated to the asset class, will hike that figure to around 5 percent over the next 10 years.
The report says a long-term supply/demand imbalance has arisen, creating strong fundamentals for infrastructure investment.
“Governments at all levels throughout the developed world are simply unable to supply the capital required for public infrastructure projects because of large deficits and severe budgetary pressures,” said Reyno Norval, an infrastructure specialist at Altius Associates, in a statement.
“Increasingly, they are seeking to access private capital to build new assets, expand or renovate existing assets, and supply the provision of essential services.”
In a recent global infrastructure report, the Organisation for Economic Cooperation and Development (OECD) forecast that – up to 2030 – Asia Pacific needs $15.6 trillion in infrastructure spending, Europe $9.1 trillion, Latin America $7.4 trillion and North America $6.5 trillion.
The Altius report found that infrastructure and real assets are beginning to stack up on the performance front. It says that three real asset classes (public energy, private energy and listed infrastructure) outperformed three traditional asset classes (US equity, non-US equity and global fixed income) over a 10-year period.
However, due to the embryonic nature of the asset class, the report concedes that “performance history for infrastructure investments is fairly limited on the listed side and non-existent for private funds”.
Altius Associates advises or manages $23 billion in private equity and real assets funds for clients in Europe, North America and Australia. It has offices in the UK, US and Singapore.