A new report from Altius Associates has predicted a dramatic rise in demand for infrastructure investments from long- term investors over the next decade.
Altius Associates, which specialises in real assets and private equity, said that at present institutional investors have less than 1% of their portfolios in infrastructure but it expects this to rise to 5% over the next 10 years, as investors allocate to either infrastructure as a stand-alone asset class or as part of a wider real assets allocation.
Reyno Norval, infrastructure specialist at Altius Associates, commented: “Governments at all levels throughout the developed world are simply unable to supply the capital required for public infrastructure projects because of large deficits and severe budgetary pressures. Increasingly, they are seeking to access private capital to build new assets, expand or renovate existing assets, and supply the provision of essential services.” He added that the OECD supported the view that trillions of dollars in infrastructure is required globally.
One issue for potential investors is the very limited performance data for infrastructure investments. On this, Altius said that the best private infrastructure managers are achieving their target yields, while 10 year net returns of infrastructure versus traditional assets show that infrastructure has outperformed US equities, non-US equities and global fixed income. Other factors attracting investors to infrastructure are its risk- return profile, its inflation-hedging characteristics and the prospect of positive long-term cash inflows which could match pension fund and insurance company liabilities.