Largest Investors ‘Dominate’ Infrastructure Market

The so-called “$1 billion club” exerts disproportionate influence and capital, according to Preqin.

Infrastructure investing is ruled by a small number of investors and managers able to commit $1 billion or more to the asset class, according to Preqin.

Preqin data has shown the 69 institutional investors comprising the “$1 billion club” have become the “dominant market participants,” allocating 7% of their total portfolios to infrastructure on average. Investors with smaller commitments, meanwhile, typically invested just 3.3%.

These larger investors—which included a high proportion of public pension and Canadian investors—were more likely to have separate allocations to the asset class, with 69% reporting separate infrastructure portfolios compared to 34% of smaller investors.

“The increased resources, both human and financial, that the members of the $1 billion club of investors can bring to bear on the industry allow them to take a more tailored approach to the infrastructure market,” said Tom Carr, head of real assets products at Preqin.

Preqin said higher levels of resources and experience allowed $1 billion club members “greater access to the market through direct investments.” More than three-quarters (82%) of these investors invested directly, compared to 31% of non-members.

“The high proportion of investors choosing to directly invest in projects is indicative of their size, and their greater experience allows them to rely less on the expertise of fund managers to identify attractive investment opportunities,” Carr said.

As for those managers, Preqin tracked 84 infrastructure firms globally that have raised more than $1 billion in the last 10 years. These firms collectively accounted for $320 billion, or 85% of investor commitments since 2006.

Of those 84 managers, just six raised more than $10 billion. The top six combined represented $108 billion, or 29% of capital raised over the decade—suggesting an “increasing stratification by size.”

“It is likely that $1 billion club investors will see further growth in their number over the coming years, as many large investors which do not currently qualify are below their target allocations to the asset class,” Carr said. “As more investors join this group of the largest infrastructure investors, its members are increasingly becoming dominant participants in the infrastructure market.

Related: Taking on the Infrastructure Big Boys & Infrastructure’s Brave New World