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Infra secondaries pricing tops all strategies

Average top bids for stakes in infrastructure funds have surged 33% since 2011, according to advisory firm Setter Capital.

Bids for infrastructure fund stakes were higher than any other strategy in the last five years, according to a report by Setter Capital.

Average top bids for infrastructure funds reached 96.9 percent of net asset value as of 30 November, a 3.8 percent jump compared with a year earlier, according to the Toronto-based advisor’s latest price report. The firm priced 42 infrastructure funds which were generating an average internal rate of return of 8 percent.

“Demand for infrastructure has increased, which reflects the increase in price,” Setter founder Peter McGrath told sister publication Secondaries Investor. “Before, people were trying to achieve returns [with infra] they would get with PE secondaries, but now buyers are much more willing to price infra [funds] more appropriately because these are less risky – so you don’t have to get as high of an IRR or a multiple, and there’s less of a discount in pricing.”

Infrastructure was the only strategy to have consistently increased in its average top price year on year, with no decreases. Bids have risen 33 percent from 73.1 percent of NAV since 2011, according to the report.

The average top price refers to the mean of top prices across asset classes and time intervals. Setter notes it receives more price data from buyers for more saleable funds, meaning they have higher liquidity ratings.

Turnaround funds had the second highest average bids at 95.5 percent of NAV, a 3.2 percent fall from a year prior.