Interest from retail and institutional investors is leading to increased investment in infrastructure, however the current market is small compared to the amount of funds chasing these returns.
For comparison, the market capitalisation of the UK equity market sits at roughly £2.1trn – rather larger than the £250bn pipeline of private funded infrastructure projects listed above.
Due to the nature of the asset class, a high degree of specialised knowledge is required to gauge risk and invest astutely.
Depending on the level of involvement, additional resources may need to be deployed to maintain the investment over the project’s lifetime. Long-time horizons are required as investor capital is usually locked in for the life of the infrastructure project.
Investors should be aware liquidity risk is high for most infrastructure projects. Vehicles such as infrastructure exchange-traded funds should be approached with caution, as the liquidity of these structures is mirage-like and will, ultimately, be dictated by the liquidity of the underlying investments.
Jason Baran is insight analyst (investments) for Defaqto
