Institutional investors are looking to increase the share of infrastructure in their portfolios over the next five years in a bid to diversify their holdings and gain access to stable returns, a new survey reveals.
The annual survey by German investment management giant Patrizia, which polled over 100 institutional investor clients across Europe, found that 64% of respondents plan to boost their exposure to infrastructure relative to other asset classes over the next five years. Of these, 20% are planning an increase of more than 10%.
Portfolio diversification (87%) is seen as the main benefit of investing in infrastructure, followed by its attractive risk-return profile (57%), its stable, regular returns (49%), the inflation hedge it provides (34%) and the illiquidity premium offered by infrastructure (30%).
Graham Matthews, CEO of infrastructure at Patrizia, commented: ‘We strongly believe this decade belongs to infrastructure: demand for investments in this sector is greater than ever, driven by the rapid pace of change we are seeing around the world.’
He noted that governments alone cannot keep up with the global megatrends of urbanisation, demographics, digital connectivity, social inclusion, climate change and decarbonisation. ‘Investment from private enterprises is essential if we are to master these challenges and build a smarter infrastructure for thriving and liveable cities, delivering on the need to create sustainable economies for generations to come.’
At the publication of its first-half earnings results last week, Patrizia highlighted the benefits it had derived from investing in infrastructure, notably in terms of portfolio diversification and resilience. Last year, the company acquired infrastructure firm Whitehelm Capital, tripling its infrastructure AUM overnight.
The client survey further found that renewable energies are the most popular asset class within infrastructure, with nearly 80% of investors looking at this segment.
Utilities, transportation and social care are also garnering strong interest, with around 60% of investors planning to increase or significantly increase the weightings of these asset classes over the next five years.
To expand their exposure, institutional investors prefer to invest in infrastructure equity via funds (48%) or direct investments (33%), while they seem to be less familiar with alternative investment options such as funds for listed infrastructure (10%) or funds-of-funds (6%).