LPs still “under-allocated” to infrastructure(2)

A majority of investors plan to invest with new managers over the next 12 months, research suggests – with co-investment and co-mingled funds their preferred options.

Institutional investors are looking to bump up their infrastructure allocations in the coming months, according to Infrastructure Investor’s LP Perspectives Survey 2014.

Early results of the study, compiled by Infrastructure Investor Research & Analytics, show that nearly 65 percent of respondents consider themselves under-allocated to the asset class, with about 49 percent intending to increase their target allocation over the next 12 months.

This seemingly translates into significant appetite for new fund investments, with more than half of respondents saying they are working with “too few” managers and looking to select new ones in the coming year. The survey, to which investors are still welcome to respond by following this link, also finds that co-investment and co-mingled vehicles remain the channels of choice for limited partners (LPs) looking to crank up their exposure to infrastructure.

This is despite high levels of competition for assets, political sentiment and regulatory risk remaining top concerns for many LPs. Interestingly, respondents also single out the level of management fees and separate account arrangements as key to strategic decisions guiding their investments in infrastructure, and rank “persistence”, in the form of a repeatable track record, as a key criterion when selecting general partners (GPs).

Close to 45 percent of respondents, which in their majority currently allocate between 2 percent and 5 percent to infrastructure, started investing in the asset class between 2005 and 2009, the survey said. About the same proportion so far intend to back two to three new managers over the next 12 months, with a clear preference for primary funds located in Western markets.

Energy, water, renewables and waste provisionally rank as the most popular sectors, with rail, road and social infrastructure following closely. Emerging Asia, excluding India and China, are seen as the most likely emerging region to provide attractive investment opportunities over the coming year.

Infrastructure Investor’s LP Perspectives Survey 2014 polls investors on their top concerns, priorities and strategies with regards to infrastructure. Respondents typically include a wide array of institutions – from foundations and sovereign wealth funds to pensions and asset managers – headquartered all around the globe. Final results of the survey will be unveiled in the November issue of Infrastructure Investor.


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