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Proportion of Funds
As shown in Fig. 1, management fees and carry 40%
35%
In a recent Preqin survey, 70% of institutional investors structures represent the most pressing issues facing 30% 25%
stated plans to make further unlisted infrastructure fund the industry in the eyes of investors questioned by 25%
20%
commitments in the coming 12 months, up from 40% Preqin. Many investors believe infrastructure fees should 15% 10% 10%
10% 5% 5%
in October 2009. This increased investor confidence is emulate the risk/return profile of an infrastructure asset, 5%
shown in recent fundraising figures, with 15 infrastructure characterized by a lower level of risk rewarded with a 0%
1.25-1.49%
1.50-1.74%
1.75-1.99%
2.00-2.24%
2.25-2.49%
< 1.25%
funds reaching a final close so far in 2010, raising an lower and more stable level of return. However, in contrast
aggregate $18.7bn. This is already more than double the to investor sentiment, many infrastructure fund managers
$7.8bn raised in the whole of 2009. remain reliant on the 2/20 private equity fee structure.
Source: Preqin Management Fee
However, these investors also highlighted several key As shown in Fig. 2, 50% of infrastructure funds currently
issues that need to be addressed in order to ensure raising capital or those closed with a 2009/2010 vintage
continued growth within the infrastructure industry. The charge a 2%+ management fee during the investment
$18.7bn raised thus far in 2010 is still only just over half period, showing there is a clear discrepancy between
the $33.9bn raised in 2008, meaning there is still a long what investors expect and what many fund managers are
way to go for the industry to reach pre-financial crisis currently willing to accept in terms of fees.
levels. Although this is partly due to lack of available
funds for new investments, there are other limiting In contrast, 50% of infrastructure fund managers Infrastructure Online is the most comprehensive resource
factors causing investors to hold back from making new are beginning to address this issue by charging a available to infrastructure professionals today. It is a vital
commitments. management fee lower than 2%. This shows that the source of information whether you’re a GP, LP, fund of
industry is reacting to LP pressure with prominent funds, placement agent, lawyer, consultant or advisor.
In order for the asset class to continue to grow, both LPs private equity firms like KKR and Blackstone publicly Information is available across the following main areas:
and GPs need to understand the roadblocks currently lowering their management fee and carry to show their
limiting investor activity, and then work together to find commitment to a mutually acceptable alignment of > Investors
interests in their infrastructure vehicles. > Fund Terms
> Fundraising
Fig. 1: Investor Views on the Key Issues Facing the Infrastructure
Preqin’s August edition of Infrastructure Spotlight featured > Performance
Preqin Hedge provides the most comprehensive institutional
Industry investor
an interview with Henri Piganeau, a member of the > Fundinformation
Managersto hedge fund industry professionals available
today. Whether you are a fund manager, third-party marketer, prime
> Deals
broker, consultant or advisor, Preqin Hedge is a vital information
35%
service for you. Our unique products include information on:
30% 29% For more information and to arrange a demo please visit:
> Institutional Investors Available as:
Proportion of Respondents
150 risks associated with high proportions of leverage. > Online Database Services
113 > Consultancy and Research Support
100 93 > Tailored Data Downloads
Fund Structure Join
oin our group on Follow us on:
63
Fig. 4 shows that the majority of infrastructure investors For more information and to register for a demo, please visit:
50
(52%) believe the private equity fund model will continue www.preqin.com/hedge
0 to be utilized in the infrastructure asset class over the
2004 2005 2006 2007 2008 2009 2010 long term. However, these investors are concerned that Search for Preqin www.twitter.com/preqin
YTD
Source: Preqin the existing model does not correlate with the long-term
%
Median Net IRR
flexibility into fund commitments is one way in which (%)
To view further analysis of the infrastructure survey results
0
liabilities and investment horizons can be matched – for 1993-1999 2005 2007
Minimum Net and the full interview with Henri Piganeau, please visit:
-10 IRR (%)
example giving investors the opportunity to maintain an
interest in underlying fund investments after a typical -20 www.preqin.com/docs/newsletters/INF/Preqin_Infra_
twelve year period. -30 Spotlight_Aug_2010.pdf
-40
What is clear is that concessions must be made by Source: Preqin Vintage