KEY FINDINGS OF THE 2023 INSTITUTIONAL INFRASTRUCTURE ALLOCATIONS MONITOR

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1. Globally, institutions are under-invested in infrastructure by an average of 98 bps versus target allocations. This under-allocation is particularly pronounced in The Americas, where institutions are currently 152 bps under-invested, with many expected to further increase their target allocations in 2024. Private pensions have the largest gap to close in terms of current infrastructure allocation versus target portfolio allocation – private pensions are 66% of the way to target allocations.
    

2. The 3-year average return across all institutions (~10.7%) exceeded target return levels (~9.3%) by 141 bps. When evaluating performance based on size of institution, there was a marginal difference in the actual 3-year average return, which demonstrates the resiliency and role infrastructure can play as a portfolio stabilizer for institutional investors of all sizes.
    

3. Globally, institutions continue to gravitate to higher risk, higher return Core+ and Value-Add strategies. Institutions are favoring higher return strategies as portfolios mature, and a rising rate environment impacts the relative attractiveness of SuperCore and Core strategies.
    

4. Institutional investors globally are planning to grow allocations to North American infrastructure opportunities more than any other geographic region. Growth in North America is expected to be driven by the Inflation Reduction Act of 2022 (the “IRA”), which is a first-of-its-kind legislation and the single largest investment in climate and energy in U.S. history.
    

5. Investors cited interest rates and market volatility as their top concerns for infrastructure investing. With rising interest rates, appetite for infrastructure credit strategies is growing, specifically for institutions based in APAC. 
    

6. Institutions are most likely to increase capital investments in Digital Infrastructure among the four major infrastructure verticals. On the opposite end of sectoral interest spectrum, demand for social infrastructure was the weakest out of the four major categories. 
    

7. Appetite for Energy Transition is robust and expected to grow over the next several years. Roughly 40% of respondents indicated that they plan to increase allocations to renewable energy and storage, which was more than any other Energy subsegment. “New Energy Transition”, which encompasses asset types including green hydrogen and carbon capture, is the second most popular investment strategy at 39%. 
    

8. Institutions continue to show preference for established managers, with appetite for first-time funds and emerging managers remaining limited. Approximately 71% of institutions surveyed indicated that they are either very unlikely or somewhat unlikely to invest in a first-time fund or with an emerging manager.