Infrastructure has overtaken private debt as the most popular private market sub-sector new manager searches as investors’ risk aversion hits the highest level since 2016, according to investment consultancy bfinance.
New manager searches for infrastructure in 2018 at the group rose more than 2.6 times to 32 percent, overtaking private debt searches, which slipped from 57 percent to 28 percent, according to the firm’s quarterly Manager Intelligence and Market Trends report.
The shift has come against an overall tone of “increased conservatism”, bfinance said, where searches for private equity and “niche real assets” managers fell from 24 percent to 16 percent. Although equity remains the dominant form to invest in, there has also been “a modest trend” in investor demand for debt funds in both the infrastructure and real estate sectors as part of a focus on resilience.
There was also a notable trend recorded for investing in listed real assets strategies, be it listed infrastructure or real estate investment trusts. These comprised 17 percent of new equities mandates selected by bfinance in 2018, compared to nil in 2017.
An additional driver of infrastructure searches was ESG, leading to demand for renewable energy infrastructure funds. Some 30 percent of bfinance’s clients with infrastructure mandates selected a renewables-focused manager. However, separate research from bfinance this week warns “renewables managers will need to demonstrate their credentials beyond the ‘E’ in ESG”, with investors also concerned about effects from renewables on wildlife and worker safety.