In October 2009, Preqin interviewed 42 leading institutional investors in unlisted infrastructure funds from around the world as to their activity to date in 2009, their intentions for the coming year, and their thoughts on key issues affecting the industry, such as fund terms and conditions.
The full results of this survey can be found here:www.preqin.com/InfraSurvey
Key findings of the research include:
- 81% of investors have not made any new commitments in 2009, 14% have invested in one fund, only 5% in more than one new fund.
- 30% of those not committing had postponed pending commitments, 5% had cancelled commitments, 65% did not invest as they had reached their targeted allocation.
- However, 40% of investors polled will be making at least one new commitment in the coming year (21% in one fund, 19% in more than one fund). 29% have no plans to invest while 31% are undecided.
- In the long term 76% of investors will definitely be investing in the unlisted infrastructure fund market, including 13% that will be increasing their allocation. A total of 11% will no longer be investing and 13% are undecided.
- 62% of investors are not prepared to consider funds with a 2/20 fee structure, compared with 14% which will accept a 2/20 structure. 24% of investors will only consider funds with a 2/20 structure under certain conditions.
Comment:
“Although fundraising over the course of the past year has fallen dramatically, investors are generally still positive towards infrastructure funds, and our survey would suggest that investors will start to return to the market over the course of the next year. However, commitment levels have been very low, and there are concerns amongst a large proportion of the infrastructure investor community relating to the viability of certain types of investment, and also with regards to the fees imposed by the funds themselves.
With power shifting towards investors in the current fundraising market, fund managers marketing new vehicles will certainly have to consider the fee structures of their new vehicles, and also show that they are adapting their investment strategies to suit the current market conditions if they are to be successful. There are currently 119 funds on the road worldwide seeking an aggregate $115bn, and they will not all be able to achieve their targeted fund sizes based on current investor sentiment. It is essential that managers are aware of investors’ concerns if they are to attract commitments in such a competitive environment.
Tim Friedman, Head of Communications, Preqin