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This year will see an increase in the amount of institutional capital invested in infrastructure, according to Infrastructure Investor’s Investor Report Full Year 2023, which includes a survey of more than 100 LPs.
According to the report, 41 percent of LPs are looking to commit more capital to infrastructure in 2024 than last year, and only 10 percent are looking to invest less.
This increase may be led by higher allocation targets but the numbers may also reflect that many institutional pools of capital are growing by default, therefore capital spent on infrastructure will grow with it.
New players are another driver of increased capital spending on the asset class – and one new player in particular. The UAE-sponsored $30 billion climate fund Altérra already tops 2023’s list of the largest-known commitments, with a $2 billion commitment to Brookfield Asset Management‘s Global Transition Fund II.
Generally, commitments were bigger in 2023 than ever before, despite market conditions. In 2022, a commitment of $400 million was sufficient to top the list of the largest-known commitments.
Now, Altérra’s largest commitment is five times that, and another two Altérra commitments also made the top five, in support of Brookfield’s Catalytic Transition Fund and BlackRock’s fourth flagship.
One US-based pension and one Swedish insurer provided $500 million-plus commitments in 2023 to the Brookfield Infrastructure Fund V and CIP V, respectively.
When committing capital, LPs prefer to do so in developed regions, leaving Africa, the Middle East and Latin America as fringe plays. Asia-Pacific fares better, but one-fifth of LPs will not go there and just over one-quarter are looking to invest less this year than last in the region.
As for strategies, core, super-core and opportunistic strategies are finding 2024 a little hard going as the interest centres on core-plus and value-add, with a dollop of infrastructure debt.
Looking at verticals, digital infrastructure has lost some lustre, as only one-third of LPs want to invest more in this subsector in 2024 down from 51 percent last year.
Even renewables, that other usually unwavering vertical, is seeing some support seep away: 16 percent of investors surveyed are looking to invest less in renewables this year, compared with 11 percent last year. Still, 38 percent are looking to invest more capital in the sector.
Looking at our database, there are fewer underallocated investors than a year ago and, correspondingly, more investors overallocated to infrastructure. This would suggest an applaudable change to allocations towards more infrastructure.
This conclusion is supported by data showing that private pension funds have increased their reported allocation from 4.4 percent to 5.5 percent over the year. Public pension funds have moved even higher, from 5.2 percent to 6.4 percent.
Again, the rises will at least partially be due to the denominator effect, but it is a fact that infrastructure’s slice of the AUM pie is markedly larger now than a year ago.
You can download the report as a PDF HERE and download the data HERE.
