The road ahead for infrastructure investments looks positive, but institutional investors are also likely to remain cautious of this asset class over the coming months, according to a report by Preqin.
In 2011, 28 unlisted infrastructure funds raised an aggregate US$16 billion—a 49% decrease from the US$31 billion raised by infrastructure funds closed in 2010. However, this is still 85% more than was raised by funds closing in 2009 in the midst of the economic crisis, says Elliot Bradbrook, manager of infrastructure data with Preqin and author of the report. “Despite this dip in annual fundraising, a further $13.1 billion in fresh capital was raised by funds holding interim close in 2011, showing good momentum in the fundraising market moving into 2012.”
This investor appetite, combined with increased reliance on the private sector as a source of capital for infrastructure development, points to the market continuing to grow over the long term—even if that growth is minimal this year, says Bradbrook. “With the majority of funds on the road having been launched since the financial crisis, the fundraising market largely comprises new vehicles targeting lower and more realistic levels of capital. Institutional investors will remain cautious in 2012, meaning [that] these funds are likely to be on the road for some time and hold several interim closes before reaching a final close.”
Preqin’s mid-2011 investor study found that 62% of respondents planned to make infrastructure fund commitments in the following 12 months.