More and more, pension fund managers are looking to the infrastructure asset class for investments that feed their appetites for diversification and steady cash flows.
As this wave continues to gain a sense of where its crest lies, the question of whether to invest directly, through funds, or through co-investments becomes increasingly important for managers that have the heavy responsibility of ensuring that their contributors' retirement accounts are in order when they come to call. Amoung a small crowd of seasoned investors in the infrastructure asset class, though all were not in full agreement as to what the exact definition of that class includes, some light was shed on the way that institutional investors view their interaction with GPs and funds.
One platform was said to utilise funds particularly in new geographies, typically through a co-investment “sidecar” that allows quick deployment of capital. That team also noted that in the geographies they operate, there are ample instances of larger deals cropping up that only funds with access to large amounts of capital can truly contemplate, and in those cases a more direct co-investment strategy is sometimes applied where they are “quite involved”.
A key requirement in co-investments for another LP was said to be real transparency-being able to see and understand the way a manager thinks, the way they're analysing risk, which ultimately gives them a clearer sense of whether the investment fits their strategy.
Looking forward, one pension manager said that the trend of direct investments amoung LPs is expected to continue, and in terms of the GP market, the bifurcation between the haves and the have-nots is likely to be even more pronounced than it is today in the coming years. With the trend of LPs increasingly seeking transparency and lower fees from their GPs, the manager said it's likely that the LP community will become increasingly organised and more clear about what they want from the GPs.