Pension funds to rely more on consultants for infrastructure

GLOBAL - Institutional investors' increasingly limited resources and lack of knowledge about infrastructure has left them unable to analyse potential investments in the asset class in-house, a new report has revealed.

According to a study by Preqin, institutional investors are set to increase their exposure to infrastructure in the coming 12 months as a mean of diversifying portfolios, but most will outsource due diligence and portfolio structure to dedicated investment consultants.

Preqin predicted primary, unlisted (private equity) infrastructure funds would receive the lion's share of institutional investment, as the majority of consultants surveyed believe this sector currently offers the best investment opportunity in the market.

Funds of funds were considered the least attractive method of investment, mainly due to their additional layer of fees.

Geographically, half of the consultants surveyed cited Asia as offering attractive investment opportunities over the next 12 months.

Europe, however, is expected to remain the focus for infrastructure investors over the short to medium term, with 47% of consultants saying the region would offer attractive opportunities in the coming months.

In a previous interview with IPE, Michael Barben, partner and head of private infrastructure at Partners Group, said Europe offered a large deal flow at the moment, especially in core operating, regulated assets, "as large utilities such as Vattenfall, E.ON or RWE are seeking to dispose of some of their assets, and private capital will obviously be needed to finance such transactions".

Preqin's survey also identified several markets of growing importance outside Asia. A significant proportion of investment consultants - 42% - said they saw South America as an attractive region in which to invest over the next year.

Last month, a previous study by Preqin showed that institutional investors were showing a strong appetite for infrastructure, with almost three-quarters seeking to make further investments in the asset class over the next year.