The IPE Real Assets top 100 ranking of some of the world’s largest infrastructure investors has captured more than $415bn (€376bn) in infrastructure assets held by pension funds, sovereign wealth funds, insurers and other institutional capital owners. It was based on IPE Research survey data, Rainmaker information and publicly available information, predominantly in the form of annual reports. Where accurate numbers were not available, estimates have been made. Some investors have not been included due to a lack of information.

We also surveyed investors about their allocations, investment intentions and views on the market. One of the key findings is that most investors do not believe the infrastructure asset class is too expensive – the proportion of respondents with this perception has risen from 52% in 2018 to 72% in 2019 (figure 7).

The finding suggests investors have not been put off by the growing competition and will continue to direct capital towards the sector. Nearly all investors surveyed expect to increase (51%) or maintain (46%) their allocations to infrastructure over the next 18 months (figure 3). And of those that do not currently invest in infrastructure, 23% have definite plans to enter the asset class and 41% say they might invest in the future (figure 4).

For example, Holger Kerzel, who is responsible for illiquid assets of Munich Re and ERGO, says that although infrastructure is looking pricey historically, no asset class is cheap anymore. “Infrastructure, in comparison, is attractive,” he says. Some argue that infrastructure had been too cheap, echoing research by EDHECinfra that suggests the asset class has reached fair value after a period of “price discovery”.

“We’ve been involved in the asset class for a long time, so we’ve been benefitting from that compression of returns,” says Guillaume Morency, infrastructure portfolio manager at Canadian institution Desjardins. “It depends on sector and geography, but in general we still see a good opportunity with pricing that makes sense to us as a core investor.” He adds that the “current prices are supported by the wall of capital” targeting the asset class.

APG is included among those investors expecting to increase their weighting to infrastructure. The Dutch pension fund investor is in the midst of increasing its allocation from 3% to 4% and so it has plenty of ‘dry powder’, although Ron Boots, head of infrastructure Europe at APG, stresses that it is not under pressure to deploy capital.

“When we started infrastructure 15 years ago, clearly expected returns were much higher than currently. But if you do your homework well and you [are] selective on deals you want to pursue then I think there is still money to be made,” he says. “I think we can still make a decent return from infrastructure.”

Swedish pension fund manager Alecta is part of the 23% of investors that have definite plans to enter the asset class. “We have decided that we want to invest in the asset class,” Frans Heijbel, head of international real assets at Alecta. “We think it’s attractive, given where interest rates are and are likely to be and also given the perceived stability and predictability in terms of returns.”

He admits that the “pricing is challenging”, and that Alecta is looking for core infrastructure exposure, not higher-return, “value-add or private equity-type infra”.

top 100 at a glance

top 100 at a glance pt2

Close to two thirds of investors are seeking returns of between 5% and 10%, and most of the rest are seeking 10-15% returns (figure 12). Some investors are concerned about other investors stretching for higher returns by taking on more risk.

Adapting to market dynamics
”The structure in the market has changed,” says Kerzel. “The low-risk part of the market, where you have availability-based, government-backed, very, very stable assets, are more much expensive than they have been before, and there is continuing demand for those assets. So a lot of investors have shifted to the more risky side and take some market exposure.” He says fund managers are “less reluctant to be in more riskier assets”, because “they want to earn their carry and they can only deliver the returns to their LPs only if they take more risk.”

Morency says: “There are a lot of value-add managers. We don’t like the fact that many of them are stretching the risk profile of the asset they are acquiring just to meet their absolute-return target…. that is not why we invest in infrastructure.”

He says this is why Desjardins is increasingly investing more directly, which can include co-investment. “We invest in some more value-add GPs that can unlock value in a 10-year frame, but our preference would be to align with partners of 15 or 25-year-term holding period,” he says.

APG’s infrastructure programme has evolved over 15 years. “It has clearly transitioned, as planned, as we started from funds with co-investments and are more into direct type of deals,” says Boots. “We want to work with partners in a consortium. In some cases we try to lead the consortium. We like to steer where our money goes, we want to be in control.”

But this has required an increase in internal staff. Boots was the first in the infrastructure team in 2005; now APG has 35 people looking at the asset class spread between its offices in Amsterdam, Hong Kong and New York. “You need the skills, the experience, the team, the capacity,” Boots says.

When those investors without an exposure to infrastructure were asked to describe the biggest impediments to invest in the asset class, many mentioned a lack of resources, competition and pricing, complexity and transparency. Figure 11 shows that 41% are not persuaded by the risk-return or diversification properties (up from 10% last year).

The illiquidity of the asset class was selected by 27% of investors (down from 38% last year). Figure 10 shows how liquidity is very important to only 14% of investors, somewhat important to 24%, and not important to more than half. Figure 14 also shows that the majority are looking to hold assets for the long term, with 81% seeking to hold for more than 10 years.

Other investors, while similarly looking to hold for the long term, will consider taking profits if a buyer’s price is right. “We are generally at buy-and-hold,” says Ulrik Weuder, head of global direct investments at Danish pension fund ATP. “That said, every asset is for sale every day.”

Boots says APG is a long-term investor and takes on projects “for at least 15 years or longer”. He adds: “So we are not in the need of selling assets, given that we are into a building phase and growing our exposure. But it is fair to say that if we identify a project that either is not performing as expected or maybe someone is reaching out and says you have this in your portfolio and I am very desperate to buy it…. we clearly will consider taking some money off the table where appropriate.”

While most investors agree that infrastructure is not too expensive across the board, there are pockets where greater concentration of capital has led to pricing that is deterring some of them.

One of the most sought-after and keenly priced areas of the market is renewable energy. This was the most favoured sector among investors (72%), followed by telecoms (61%) and water (47%) – note that percentages do not add up to 100 as survey respondents were able to select more than one answer. “Generally, the renewables market is quite expensive,” says Boots. “If you look at some of the offshore wind projects – especially if you look at Germany – the returns you can make there are quite tight. It might be for a good reason, but a lot of money has flown into some market segments.”

renewable energy assets top the list of favoured sectors

Renewable energy assets top the list of favoured sectors

Morency says Desjardins has invested in renewables a lot in the past, because the long-term contracts are a good match for the group’s pension and insurance liabilities. “But going forward it’s getting more and more difficult to acquire assets with long-term contracts,” he says.

Desjardins is also “cautious” on regulated assets, because of the political risk involved, and is targeting an exposure to 20%. “We have exposure to the water sector in the UK, so we follow that carefully,” he says, referring to the potential for a future Labour government to nationalise British utilities.

Kerzel points to the UK under a Labour government led by Jeremy Corbyn as “probably more of a threat” than Brexit, because the ramifications for infrastructure investors could be “more long lasting”. In line with the two previous years, the proportion of investors that say Brexit has had no effect on their infrastructure strategies has remained at 70% or above (figure 19). This year, the next biggest group (22%) said they would decrease their investment in the UK, also consistent with the findings in 2018 and 2017.

Kerzel says Brexit “has an impact on the market” but does not affect “our investment activity directly”. He explains: “Indirectly because there is less activity currently in the UK market. Obviously, that is related to the Brexit uncertainty…. If there is an opportunity within the UK, of course we would in our due diligence process have a look at the Brexit consequences for this investment, but it doesn’t hinder us to do something.”

Boots says Brexit has led to “remaining uncertainty” and APG has exposure to the market. But, he says, it could lead to opportunities if other investors avoid parts of the market.

Top 100 investor survey results

1 investment intentions

2 do you invest in infrastructure

3 do you expect your allocation to change over the next 18 months

4 if you do not invest in infrastructure which of the following apply

5 how much do you expect to invest or commit over the coming 18 months

6 how much have you invested or committed in the past 12 months

7 broadly speaking is infrastructure too expensive as an asset class

8 how attractive is infrastructure versus real estate

9 would a rise in interest rates affect your allocation to infrastructure

10 how important is liquidity in your infrastructure portfolio

11 what are the main reasons why you do not invest infrastructure

12 what annual return do you require

13 where does infrastructure sit

14 what investment holding period are you

15 do you invest directly or indirectly through funds or listed investments

16 do you invest in infrastructure debt or only equity

17 do you consider infrastructure

18 when investing in infrastructure

19 has brexit affected your infrastructure strategy

20 will infrastructure opportunities in the us increase under the donald trump administration

 

Top 100 Infrastructure Investors 

Top 100 Infrastructure Investors 2019
 InvestorCountryInfrastructure assets ($’000)Total assets ($’000)As at
1 Allianz Germany 27,679,800 769,543,000 31/12/18
2 Canada Pension Plan Investment Board Canada 24,936,200 293,453,000 31/03/19
3 National Pension Service South Korea 20,507,900 575,260,000 31/05/19
4 Caisse de dépôt et placement du Québec Canada 16,638,500 226,855,000 31/12/18
5 OMERS Canada 15,245,800 73,503,200 31/12/18
6 APG Netherlands 13,917,600 556,702,000 31/05/19
7 Ontario Teachers’ Pension Plan Canada 13,088,200 151,542,000 30/06/19
8 PGGM Netherlands 12,696,100 241,226,000 31/12/18
9 PSP Investments Canada 12,580,400 125,804,000 31/03/19
10 Legal & General UK 11,805,700 625,016,000 31/12/18
11 AustralianSuper Australia 9,407,650 102,012,000 31/12/18
12 AXA France 9,361,940 908,205,000 31/12/18
13 State Super Australia 9,282,480 30,238,400 31/12/18
14 Future Fund Australia 9,012,120 109,540,000 31/03/19
15 British Columbia Investment Corp Canada 8,955,920 112,946,000 31/03/18
16 AIMCo Canada 7,772,400 86,289,300 31/03/19
17 Teacher Retirement System of Texas US 7,695,967 154,699,525 31/12/18
18 Qsuper Australia 7,594,750 72,994,000 31/12/18
19 UniSuper Australia 7,524,430 56,468,400 31/12/18
20 USS UK 6,999,630 89,213,400 26/06/19
21 Aviva UK 6,799,430 546,287,000 31/12/18
22 MEAG Munich ERGO Germany 6,393,180 269,186,000 31/03/19
23 ATP Denmark 6,018,880 120,224,000 31/12/18
24 Manulife Canada 5,937,080 259,252,000 31/12/18
25 Employees Provident Fund Malaysia 4,800,850 200,640,000 31/12/18
26 Korea Investment Corporation South Korea 4,400,000 131,600,000 31/12/18
27 CalPERS US 4,370,000 355,820,000 31/08/19
28 IMCO Canada 4,104,650 46,397,200 31/12/18
29 Hesta Australia 4,008,340 35,582,800 31/12/18
30 CalSTRS US 3,757,000 236,938,000 30/06/19
31 CBUS Australia 3,727,050 32,840,300 31/12/18
32 PensionDanmark Denmark 3,577,960 37,302,200 30/06/19
33 PKA Denmark 3,577,580 41,865,300 27/06/19
34 Alaska Permanent Fund US 3,460,300 61,844,700 31/12/18
35 First State Super Australia 3,023,840 52,882,000 31/12/18
36 Washington State Investment Board US 2,980,853 134,700,000 31/03/19
37 Bayerische Versorgungskammer Germany 2,961,790 97,107,900 31/12/18
38 Industriens Pension Denmark 2,909,890 263,441,000 31/12/18
39 Sunsuper Australia 2,883,190 45,990,400 31/12/18
40 PFA Denmark 2,877,600 80,390,000 30/06/19
41 TIAA US 2,825,000 307,700,000 31/03/19
42 Ärzteversorgung Westfalen Lippe Germany 2,816,910 15,984,000 31/05/19
43 Government Pension Investment Fund Japan 2,647,140 1,433,880,000 31/03/19
44 Hostplus Australia 2,629,360 30,445,200 31/05/19
45 Talanx Germany 2,401,690 140,458,000 31/12/18
46 New Jersey Division of Investment US 2,400,000 78,186,000 30/06/18
47 Lloyds Banking Group UK 2,308,610 60,566,200 31/12/17
48 New York City Retirement Systems US 2,155,000 198,986,000 31/05/19
49 Swiss Life Switzerland 2,119,590 216,308,000 31/12/18
50 Rest Super Australia 2,109,650 41,771,100 31/12/18
51 Desjardins Group Canada 2,083,260 10,482,900 31/03/19
52 The Crown Estate UK 2,065,870 17,628,300 31/03/19
53 Oregon PERF US 2,000,000 75,000,000 31/12/18
54 CFS FirstChoice Australia 1,898,690 54,288,400 31/12/18
55 OPTrust Canada 1,814,840 14,595,700 31/12/18
56 AP3 Sweden 1,798,170 39,959,400 31/12/18
57 Gothaer Germany 1,733,420 37,964,800 30/06/19
58 Ilmarinen Finland 1,570,250 52,715,700 31/03/19
59 Maine PERS US 1,564,947 15,160,477 30/06/18
60 BBC Pension Scheme UK 1,509,770 23,243,400 31/03/18
61 Alberta Heritage Savings Trust Fund Canada 1,444,500 13,663,200 31/03/19
62 Barclays Bank UK 1,422,580 37,718,000 31/12/18
63 Sampension Denmark 1,364,000 45,466,800 30/06/19
64 New York State Common Retirement Fund US 1,349,605 218,548,322 31/12/18
65 Danica Pension Denmark 1,278,930 68,666,500 30/06/19
66 ESSSuper Australia 1,265,790 21,096,500 31/12/18
67 AMF Sweden 1,230,720 51,996,300 31/12/18
68 Pennsylvania PSERS US 1,201,000 53,329,000 31/12/18
69 MTAA Super Australia 1,195,470 8,649,580 31/12/18
70 Lothian Pension Fund UK 1,172,090 10,418,600 31/03/19
71 Virginia Retirement System US 1,169,840 76,669,018 30/06/18
72 MN Netherlands 1,143,790 148,693,000 31/12/18
73 Commonwealth Super Australia 1,125,150 31,363,500 31/12/18
74 WorkSafeBC Canada 1,063,800 12,934,900 31/12/18
75 VicSuper Australia 1,054,830 16,666,300 31/12/18
76 CareSuper Australia 1,046,940 11,167,400 25/07/19
77 Maryland SRPS US 1,000,000 54,200,000 30/06/19
78 Pension Protection Fund UK 982,210 52,078,500 31/03/19
79 Swiss Re Switzerland 920,000 207,570,000 31/12/18
80 Nordrheinischen Ärzteversorgung Germany 915,033 16,013,100 31/12/18
81 Sacramento CERS US 892,500 9,500,000 31/03/19
82 Texas ERS US 861,000 28,700,000 30/06/19
83 Mercer Super Trust Australia 843,861 17,158,500 31/12/18
84 Alberta Teachers’ Retirement Fund Canada 830,528 12,816,200 31/08/18
85 Alaska Retirement Management Board US 782,313 24,874,760 31/12/18
86 Pension Fund Association Japan 775,560 103,708,000 31/03/19
87 Australian Catholic Super Australia 773,540 6,188,320 31/12/18
88 TelstraSuper Australia 773,540 14,978,500 31/12/18
89 Keva Finland 758,727 60,811,800 30/06/19
90 ASGA Pensionkasse Switzerland 750,540 17,233,000 31/12/18
91 Varma Mutual Pension Insurance Co. Finland 708,032 52,855,200 30/06/19
92 MLC Super Australia 703,220 57,171,600 31/12/18
93 BT Pension Scheme UK 684,004 65,363,700 31/12/18
94 Florida State Board of Administration US 682,300 160,438,425 30/06/18
95 PGB Netherlands 672,966 33,536,100 31/03/19
96 MP Pension Denmark 624,131 18,439,600 19/08/19
97 Publica Switzerland 609,370 39,006,900 18/03/19
98 UTIMCO US 554,500 32,295,800 31/08/18
99 Railways Pension Scheme UK 534,259 33,827,100 31/12/18
100 Pensam Denmark 525,362 22,365,400 09/08/19
101 Migros Switzerland 520,706 23,696,000 31/12/18
102 Elo Finland 511,502 27,052,700 30/06/19
103 Enpam Italy 480,284 24,014,200 31/12/18
104 South Yorkshire Pensions Authority UK 428,915 11,032,500 30/06/19
105 DIP/JØP Denmark 419,029 19,246,200 30/06/19
106 AP1 Sweden 411,710 36,019,100 31/12/18
107 Arizona State Retirement System US 373,428 39,968,355 31/12/18
108 State Pension Fund (Valtion Elakerahasto – VER) Finland 371,814 21,871,400 31/03/19
109 SERS of Ohio US 370,000 14,300,000 31/03/19
110 Fonds de Reserve pour les Retraites France 329,616 37,187,500 28/06/19
111 WPV Germany 267,853 4,751,280 30/06/19
112 Tyne and Wear Pension Fund UK 266,901 11,426,300 31/03/19
113 Fondaco Italy 227,334 1,250,340 30/06/19
114 Velliv Denmark 208,713 28,325,400 31/05/19
115 Worcestershire Pension Fund UK 205,575 3,498,580 30/06/19
116 KWAP Malaysia 173,480 34,666,400 31/12/17
117 Chikyoren Japan 167,737 208,318,000 31/03/19
118 Orano France 167,112 7,241,520 26/07/19
119 Basellandschaftliche Pensionskasse Switzerland 150,912 2,012,160 10/07/19
120 Profond Vorsorgeeinrichtung Switzerland 148,787 8,332,060 31/05/19
121 SEB Pension och Försäkring AB Sweden 115,485 2,624,660 20/06/19
122 VBV Pensionskasse AG Austria 98,000 7,622,000 28/02/19
123 ABB Koncernens Pensionsstiftelse Sweden 91,162 652,805 31/05/19
124 Vinci Pension Scheme UK 89,173 331,215 25/06/19
125 New England Teamsters Pension Fund US 88,000 2,500,000 28/02/19
126 Pensions Caixa 30 Spain 73,884 4,941,100 30/06/19
127 Norsk Hydros Pensjonskasse Norway 70,475 2,349,170 27/06/19
128 An Post Superannuation Fund Ireland 56,644 3,625,180 08/07/19
129 Versorgungswerk der Architektenkammer Sachsen Germany 48,487 678,589 09/07/19
130 Pensioenfonds KBC Belgium 44,536 2,560,830 31/05/19
131 La Caisse Marocaine des Retraites Morocco 31,086 9,325,760 21/06/19
132 Pensioenfonds voor de Houtverwerkende Industrie en Jachtbouw Netherlands 22,876 686,275 31/12/18
133 Pensions Caixa 2 Spain 2,227 226,021 31/05/19