Plugging the gap

Our inaugural ranking of the 30 largest infrastructure investors in the world, The Infrastructure Investor 30, shows that private firms are making some progress toward meeting the world’s infrastructure spending needs. And investment banks are leading the charge.

We’ve all heard about the gaping deficits in infrastructure investment globally: $2.2 trillion needed for the US alone, $21 trillion for emerging markets and, even in Canada, where there is already a robust market for public-private partnerships, $1 trillion by 2050.

Everyone gets that there is a strong need for capital. But who is doing anything about it?

That was one of the questions that was in the back of our minds at Infrastructure Investor as we prepared our first annual ranking of the 30 firms who have formed the largest amount of capital for infrastructure investment globally.

Note the term formed. We rejected fluid measures such as “assets under management” that get defined in different ways at different times. We wanted to get a clear, crisp comparison of how much money the three main classes of investors in infrastructure – pensions, developers and fund managers – have created for direct infrastructure investment over the last five years.

Not to spoil the surprise, the 30 largest investors to make the list – The Infrastructure Investor 30 – will officially be unveiled on our website next week. We can tell you, though, that over the last five years they’ve cumulatively formed about $140 billion of capital to help reduce all those spending gaps.

There is an additional tidbit we’d like to share with you prior to the unveiling. You know all those people who tell you that you shouldn’t give your money to investment bank-affiliated funds and instead go with an independent fund manager? Until now, at least, investors have not been heeding that advice. Investment banks have to date created the largest portion of capital for the asset class, $48.6 billion, with fund managers close behind at $47.9 billion.

And of the fund managers’ total, about $26.7 billion is managed by houses that would consider themselves independent (even if they had to declare independence during the crisis – see our next issue for an exclusive interview with Arcus Infrastructure Partners senior partner Simon Gray).

If the proponents of independence are right, then we’d expect the investment banks' share of future Infrastructure Investor 30 capital to fall and to see independently-managed capital eventually eclipse it.

So, with our rankings in hand, we have solid data against which we can judge just how much investors will favour independent fund managers in future years, among other trends we’ll discuss in the next issue of our magazine.