Precise estimates are hard to pin down, but in the past five years, the 30 biggest investors in infrastructure have channeled as much as $180 billion into these types of investments, according to Infrastructure Investor magazine. These investors include Macquarie, as well as some of the largest pension plans in Europe, Australia and Canada.
More capital is on the way. There are 100 private funds seeking to raise $95 billion for infrastructure investments globally, according to a tally by San Francisco-based fund adviser Probitas Partners, though not all of them will succeed. Of that, about $11.5 billion would be targeted for the United States, with fund sizes ranging from $100 million to $3 billion.
“In 2003, nobody in the U.S. talked about infrastructure,” said Kelly DePonte, a partner at Probitas. “We really have seen a sea change in interest.”
The main draw for investors, DePonte said, is the steady, predictable income that infrastructure assets can provide. People need to get to work, use electricity and flush toilets, so a toll road, an electric utility or a water utility tends to deliver cash no matter what happens in the stock market on any given day. Recent research by Macquarie shows infrastructure has outperformed the global stock market by an average of about 0.5 percent per month in the past 10 years.
“Traffic on the road is highly insensitive to stock market levels,” said Chris Camarsh, head of investment process at Australian fund manager CP2. That makes infrastructure a good way to save for one’s nest egg, since “there is good predictability that the cash will be there when you’re older,” he said.
Camarsh, for example, holds shares in Transurban, an Australian toll road developer that owns an 85-year contract to build and operate an expansion of the Capital Beltway in Fairfax.
“It’s my retirement,” he said.
That has helped lure Canada’s $52 billion Ontario Municipal Employees Retirement System, which provides retirement benefits to more than 400,000 members. It has devoted about $8.25 billion, or 16 percent, of its portfolio to infrastructure because it “matches the long-term returns that we need for the pension plan,” said Michael Nobrega, chief executive of OMERS. The pension fund bid — unsuccessfully — for the Chicago Skyway and the Pennsylvania Turnpike.
Nobrega is putting together the $20 billion Global Strategic Investment Alliance with other large pensions around the world, including up to $5 billion from U.S. pension funds, to jointly buy some of the largest assets in the world.