Allocations to private infrastructure funds will grow dramatically over the next decade, according to a new report by Altius Associates Ltd. The fund manager expects allocations by institutional investors to increase by five fold

The report, Infrastructure as part of a global investment portfolio, estimates that institutional investors have less than one per cent allocated to infrastructure currently. However, a long-term imbalance in demand and supply creating strong fundamentals will push this to about five per cent over the next ten years, it states.

Altius infrastructure specialist Reyno Norval said: “Governments at all levels throughout the developed world are simply unable to supply the capital required for public infrastructure projects because of large deficits and severe budgetary pressures. Increasingly, they are seeking to access private capital to build new assets, expand or renovate existing assets, and supply the provision of essential services.”

The OECD estimates that the Asia Pacific region will need US$15.6trn in infrastructure spending between now and 2030, Europe US$9.1trn, Latin and South America US$7.4trn and North America US$6.5trn.

Relatively low correlation with other asset classes, better inflation hedging than equities and long-term positive cash flows matching pension fund and insurance company liabilities make the asset class attractive, the manager argued.

The report follows a survey earlier this month showing that two thirds of institutional investors intended to increase allocation to infrastructure this year.

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