Consultant Insights on Private Markets Infrastructure

In the first quarter of 2022 public pension plan investors reported $4.5 billion in allocations to infrastructure funds according to new data from eVestment. The figure is a 12.5% YoY increase from Q1 2021. The number of individual pension plans reporting commitments to the sub-asset class also grew over by nearly 19% over that period.

This data is another signal of the growing and sustained appetite from public plan investors for infrastructure strategies within their real assets portfolios. Institutional investors have flocked to the asset class as an inflation hedge and as an alternative to oil & gas energy strategies which have fallen out of favor due in part to a growing emphasis on ESG across the industry.

One of the driving forces for the increased interest from pension plans is the advice of their private markets consultants who have recommended increasing allocations to infrastructure. Using Market Lens, part of the eVestment Platform, we've reviewed the latest consultant outlooks and portfolio update presentations to see what these advisors are telling their clients about infrastructure.

Here are insights from three leading private markets consultants:

Meketa Investment Group

• Infrastructure assets are structured to provide a stable, predictable, long-term cash flow stream to investors
• As governments continue to confront the problem of financing necessary infrastructure projects while facing budget deficits, it is likely that private capital will be called upon more frequently and infrastructure investing opportunities will increase
• Meketa Investment Group recommends that plan sponsors with long-term time horizons consider allocations of 3% to 7% to infrastructure investments

AndCo Consulting

• Private global infrastructure is anticipated to generate an attractive long-term, risk-adjusted return profile relative to equites and fixed income, and a similar profile to core private real estate
• The long-term nature of [infrastructure] assets match the profile of an institutional investor's liabilities
• It is our recommendation that an allocation of between 5-10% can provide a meaningful increase in projected return with a commensurate level of acceptable risk

NEPC

• Robust fundraising driven by demand from investors with low costs of capital and long-term investment horizons
• Average deal size growing as dry powder reaches an all-time high of ~$300 billion
• Despite competitive market, significant capital needed to support existing infrastructure, as well as megatrends representing areas of new growth

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