Infra funds back in action on increased investor confidence

Majority of the investors plan to commit their funds in the infrastructure-focused private equity firms, reflecting the regained investor confidence in the sector, says a report.

According to the research firm Preqin, 70 per cent of the total 170 investors surveyed globally, plan to make infrastructure commitments in the coming 12 months, as opposed to just 40 per cent who intended to park their money in the infrastructure-based private equity funds last year.

"Investor confidence is slowly returning following the financial crisis, with many investors looking to increase their exposure in the coming 12 months in the infrastructure fund raising market which is both challenging and competitive," the report noted.

However, cautioning the fund managers, the report said that the investors are likely to be much more selective while making fund commitments in the future, which suggests that the fund raising is likely to remain tough in the coming 12 months compared to pre-crisis period.

As per the global survey of 450 PE funds , so far, 11 unlisted infrastructure funds have made aggregate commitments of $12.6 billion in the first half of 2010, while in 2009 infrastructure fund raising fell to its lowest level since 2005, with only 17 funds raised $7.8 billion.

An unlisted infrastructure fund generally means a vehicle, usually with a limited partnership-type structure, that is not listed on stock market. The fund invests in infrastructure assets and may also invest in infrastructure- related companies.

Other than North America and Western Europe, Asia has also gained popularity in terms of investments with 19 per cent of respondents highlighting the importance of Asian infrastructure development.

"This shows the increasing significance of emerging market infrastructure as the need for development in these regions grows, which is also reflected in the significant number of Asia and rest of world funds currently raising capital."