Relatively new as an institutional asset class in the U.S., infrastructure is one of the fastest growing real asset classes in North America, albeit from a small base, industry insiders say.
Infrastructure, along with energy, exhibited the most growth of any private asset class among the largest 200 U.S. defined benefit plans in the year ended Sept. 30, according to Pensions & Investments' annual survey.
This trend is expected to continue as investors look for consistent income. Further underscoring the asset class, the Trump administration unveiled a plan as part of its 2019 budget proposal that it said would generate $1.5 trillion in public and private infrastructure investment during the next decade, according to the administration's Rebuilding America's Infrastructure fact sheet. However, the proposal does not include a funding source. In April, President Donald Trump and the Democratic leadership in Congress agreed to a $2 trillion infrastructure plan, but no bill is yet before Congress. And since much of the transportation-related infrastructure in the U.S. is owned by states and local municipalities, industry insiders do not think a federal infrastructure bill will expand the investment opportunity in a major way.
The U.S. sector at the center of the administration's plan is transportation infrastructure — including airports, ports, bridges and logistics — and "much of it is in the hands of local municipalities," said Dylan Foo, San Francisco-based global head of direct investments for the infrastructure team of AMP Capital Investors Ltd., which manages $14.3 billion in infrastructure assets.
Infrastructure funds worldwide have had no trouble attracting a steady stream of capital. Seventy-four infrastructure funds raised $93 billion worldwide in 2018, up from 82 funds that closed on $47 billion in 2014, Preqin data show. In the first quarter, $15 billion was raised by seven funds.
And the funds are getting larger. The average size in the first quarter was $2.14 billion, up from $1.07 billion in the year-ago quarter and $786 million in the first quarter of 2014, according to Preqin. Global infrastructure assets under management totaled $491 billion as of June 2018, up 9.8% from the prior year.