Survey: European LPs back independent infra funds

A survey of European investors in infrastructure by placement agent Probitas Partners has discovered a preference for independent, global funds and ten-year fund durations. It also found that most European limited partners have dedicated allocations for infrastructure.

The “Investing in Infrastructure, Summer 2010” survey from placement agent Probitas Partners has found that 54 percent of European limited partner investors in infrastructure have dedicated infrastructure allocations, while 27 percent invest in infrastructure through private equity allocations and 11 percent from general alternatives allocations.

While 75 percent of these investors commit their capital to private funds, 28 percent co-invest alongside fund managers, 13 percent invest in public infrastructure funds and 11 percent directly into projects.

The trend for infrastructure managers to spin out from banking groups is fully endorsed by the survey, in which 55 percent of respondents said they preferred independent platforms owned and run by senior investment professionals. Only 6 percent said they preferred sponsored vehicles.

The survey found that European infrastructure investors have a “mid-teens” return expectation, with most expecting net returns in the region of 10 to 15 percent. It also found that many programmes exclude investments seeking a return of more than 18 percent as “outside” the infrastructure allocation.

When it comes to the preferred geography of target funds, more than half of investors (53 percent) said they prioritised global funds, most of which have significant allocations to OECD countries. Funds focused on Europe were preferred by 45 percent, while only 8 percent expressed an interest in emerging markets funds with a heavy greenfield element. 

European investors have mixed views on fund duration, with 33 percent saying they prefer a ten-year term, 15 percent stating a preference for fund lives of 12 to 15 years, and 22 percent not having any kind of preference.

As reported on earlier this week, the same survey found that fundraising by infrastructure funds globally reached $9.9 billion in the first half of 2010 – not far short of the $10.7 billion raised in the whole of last year.