Investors flee infrastructure

Over 80% of institutional investors have made no commitments to infrastructure funds, according to new data from Preqin.

Polling 42 LPs in October, the fund research specialist found that just 14% had invested in one fund, and 5% in more than one.

In the year to date, just nine infrastructure funds have held a final closing, raising US$6.2bn, a dramatic decline from the US$20.3bn raised by 27 funds in the same period last year.

The majority of respondents, 65%, declined to invest because they had already met their asset allocation targets, whilst 30% had postponed their commitments until market conditions improved. A further 5% had completely cancelled their planned investment, either because the market was too volatile or because of a change in investment strategy.

However, optimism remains. Forty percent of investors plan to make infrastructure investments over the next 12 months, with nearly half planning multiple commitments. A further 31% of investors are undecided.

Preqin notes that when investors do come back to the market, they will be more selective in their strategy than they have been in the past. One of the main concerns for infrastructure investors is the saturation of the fund market combined with a lack of manager experience, as many funds on the road are managed by first-timers. “Given the current market conditions and increased investor caution, investors are likely to demand more experience when investing in a fund, which may force some inexperienced managers out of the market”, the report said.