LP Perspectives: Inside the limited partner

Studying the evolving attitudes of institutional investors towards infrastructure has absorbed all of us at Infrastructure Investor ever since we started writing about the asset class.

So it felt natural to run an annual study of the views and opinions of limited partners (LPs) to analyse how those shaping the future of a still-young asset class would engage with it and its fund managers over the coming year.

The LP Perspectives survey was conducted at a healthy time for the asset class; $48.4 billion was raised from investors in 2013 – an increase of 50 percent from the previous year. At the end of the third quarter of 2014, $43.4 billion had already been raised, putting this year easily on track to be the most successful year for infrastructure fundraising since the Crisis.

However, that’s not to say it’s easy for fund managers. Investors increasingly have more exacting requirements that potential managers must meet and it is still the case that the largest and more established managers are dominating the fundraising market. For instance, this year’s fundraising total comprises just 43 closed funds – over 20 fewer than were closed in 2013 when a similar amount was raised.

Amid such a competitive fundraising climate, and since investors’ preferences neither stand still and nor are they uniform, successful fund managers must maintain an extensive understanding of limited partners’ views, opinions and future intentions.

We – the Infrastructure Investor Research & Analytics team – speak to these holders of institutional capital daily and monitor how investors from all parts of the world engage with the infrastructure asset class. In September 2014, our research analysts and senior journalists sat down to compile a list of questions that reflected the conversations being had between the investors, managers and advisers working at the heart of the asset class. We then identified a cross section of the infrastructure LP community we speak to on a regular basis and delivered the completed survey questions by email, which we followed up with telephone interviews.

Over 80 senior investment professionals completed the survey in full. The respondents represented the range of institutions that make up the world’s limited partner community, including public and private pension funds, foundations, asset managers, fund of funds managers and sovereign wealth funds. Likewise, the geographical split was representative. Investors answered questions from their offices across the US, Europe and Asia and the Middle East.

The results of the survey were then pored over by our team with the key trends identified and explored. The outcomes are dissected and analysed over the coming pages, interspersed with expert commentary on the key themes that arose from the study.

The picture that emerges from the research is that investors are, by and large, keen to deepen their relationship with the infrastructure asset class. For example, 42 percent of respondents revealed that they planned to increase their target allocation in the coming year while only six percent would decrease it. Perhaps more excitingly for managers, over six in ten of investors told us that they were currently under-allocated to infrastructure.

However there are some key differences between the approach of investors of different size, type and location which are detailed on the coming pages. One thing is for certain: managers must work harder – and show a demonstrable track record – to attract and keep their investors.

Introduction by Dan Gunner, head of Infrastructure Investor Research & Analytics