Record capital flowed into infrastructure funds last year as sophisticated investors increased their exposure to unlisted assets in a bid for more consistent returns, according to Infrastructure Partners Investment Funds Management (IPIFM).
Investors allocated US$85 billion to unlisted infrastructure last year, up $10 billion on 2017, as investors sought the asset class’ diversification, inflation-hedging and income stream potential.
If last year was large, financial data provider, Preqin, predicted 2019 would be another huge year for infrastructure, and forecasted the amount invested in unlisted infrastructure funds to rise a further 10 per cent.
Nicole Connolly, executive director of IPIFM, said while Australia’s larger industry superannuation funds have invested in unlisted infrastructure since the mid-1990s, the nation’s smaller institutional investors, high net-worth individuals, and close to 600,000 self-managed superannuation funds have traditionally been excluded from this market.
But, volatile equity markets, coupled with low interest rates and term deposits are prompting smaller investors to seek alternate alpha, and this extends to unlisted infrastructure.
“Infrastructure, and particularly unlisted infrastructure is attractive due to its typically stable, reliable returns and low correlation to equities,” she said. “Infrastructure in a portfolio sits between government bonds and equities in terms of risk return, making it an excellent portfolio diversifier.”