2018 sees record capital flows in infrastructure funds
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.”
Recommended for you
There is one specific risk that is a significantly higher concern for financial services directors compared to companies overall and is impacting their risk appetite, according to the AICD.
Global fund managers are shunning bonds, with the asset class seeing the largest drop in allocations in more than 20 years.
Australian Ethical has seen its funds under management reach $10 billion, driven by organic customer growth and superannuation contributions.
Financial advisers will have access to private equity investments run by WTW for the first time as it launches a pooled fund to provide savers with access to traditionally institutional assets.
