Global Infrastructure Hub A G20 INITIATIVE

Availability of
private capital
for infrastructure

Infrastructure Monitor 2022 59

Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

Key findings
• The amount of private capital available for infrastructure has • Some regions have attracted more infrastructure AUM than
more than quadrupled over the last 10 years. Most private capital other regions.
is raised in North America and Europe. • Limited availability of projects and high hurdle rates have led to
• Greater availability of private capital for infrastructure has a significant accumulation of dry powder, mostly in North America
translated into more investment. and Europe.
• Infrastructure capital investment has been concentrated in • Private capital raised for greenfield infrastructure projects
North America, Europe, and Asia over the last decade. is harder to invest than capital raised for brownfield and
• Capital investment continues to provide high returns, attracting secondary projects.
yet more private capital for infrastructure.
• The greater market value of infrastructure funds’ investments
reflects greater availability of capital but also greater levels of
dry powder.

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Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

The amount of private capital available for infrastructure has more than quadrupled over the last 10 years.

• Funds use private capital to invest in infrastructure equities or in infrastructure Private infrastructure capital raised by funds, 2010–2021
companies. The options available to private investors are determined by what is (USD bn)
available in the retail funds management market. Some private investors invest 140
directly in infrastructure at the project level.
120
• In the last decade, private infrastructure capital raised by funds quadrupled from
about USD34 billion in 2010 to USD129 billion in 2021.
100
• During the pandemic, the volume of capital raised dropped slightly, but it
remained above the 2018 level and recovered to a new record of USD129 billion 80
in 2021. Early in 2022, private infrastructure capital raised by infrastructure funds

USD bn
had already reached 2021 levels (USD122 billion); if the trend continues, capital 60
raised by the end of 2022 is expected to hit a new record high.
• This increase reflects the growth in the number of investors with long time 40
horizons who are seeking high-quality infrastructure assets that generate stable,
long-term returns; diversification focused on sustainable assets; and attractive 20
risk-adjusted performance.
0
• Despite a decline in returns due to rising interest rates in the first half of 2022,
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
the asset class remains attractive for private investors as its inflation-hedging
potential is relatively stronger than that of other investment options. Investors
Year of capital raising
are allocating more capital than ever towards infrastructure to mitigate
inflation risk.
Source: Preqin (2022c) data as of 23 September 2022.

Infrastructure Monitor 2022 61

Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

Most private capital is raised in North America and Europe.

• Globally, most private infrastructure capital was raised in North America and Private infrastructure capital raised by funds, by region of origin, 2010–2021
Europe over the last 10 years, and especially over the last six years. In 2020, (USD bn)
due to the pandemic, the amount of capital raised in those regions declined
slightly, but in 2021 the amount continued its previous upward trend. 60
North Europe Asia Oceania Latin Africa
America America
• On average, Asia attracted only 13% of the total private capital for
infrastructure from 2020 to 2021. However, of all the regions, Asia recorded 50

the biggest increase since 2010, growing almost seven times. Asia is also
the only region in which the amount of private capital raised for infrastructure 40
increased in 2020 over the previous year. This increase was followed in 2021
by a 62% decline, as fewer projects reached financial close due to an uneven

USD bn
30
post-pandemic economic recovery in the region.
• Over the past decade, Oceania, Latin America, and Africa also saw growth in
20
private infrastructure capital flows into funds, but not by enough to increase
those regions’ share of total capital raised. Capital levels in these regions are
significantly smaller than levels in other regions. 10

2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source: Preqin (2022c), data as of 7 July 2022.
Note: The graph excludes multi-regional funds. Region of origin refers to location of the funds’ headquarters.

Infrastructure Monitor 2022 62

Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

Greater availability of private capital for infrastructure has translated into more investment.

• The availability of more private capital for infrastructure (from more funds raised, Private infrastructure capital raised and invested by funds, 2010–2021
funds invested, and reinvestment of gains made on investments) has resulted in (USD bn)
an increase in infrastructure investment by funds. 140

• From 2010 to early 2020 (before the onset of the COVID-19 pandemic), private
120
capital raised generally outpaced private capital invested; the only exception
was in 2011. During the pandemic in 2020 and 2021, private capital raised was
100
outpaced by private capital invested.
• Since 2017 the pace of funds being called up for investment was generally 80
able to keep up with funds raised, as fund managers did well in managing

USD bn
higher levels of risk in investing in newer technologies, including digital assets 60
and renewables.
40

20

0
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Capital raised Capital invested

Source: Preqin (2022c, 2022h), data as of 23 September 2022.

Note: Investment data refers to capital called up for investment. This amount includes management fees. Capital called may exceed
100% due to recycling of capital.

Infrastructure Monitor 2022 63

Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

Infrastructure capital investment has been concentrated in North America, Europe, and Asia
over the last decade.

• Over the last 10 years, most private infrastructure capital was raised Private infrastructure capital invested by funds by region, 2010–2021
for and invested in North America, Europe, and Asia. These regions (USD bn)
have also been better able to accelerate investment as they increased
the amount of capital raised. 70
North Europe Asia Diversified Latin Africa Oceania
America Multi Regional America
• In almost all regions, capital invested (or committed) decreased 60
during the pandemic in 2020. However, in Asia, capital invested
increased during the pandemic.
50
• The trends reversed in 2021 with investment increasing in several
regions, most notably in North America. A sizeable share of the 40

USD bn
funds raised in North America in 2021 targeted investment in Europe.
In Asia, while the funds raised for investment increased in 2021, the 30
invested capital declined.
20
• In Latin America and Africa, private capital inflows from funds in other
regions boosted investment.
10
• In contrast, Oceania’s level of private capital investment points to
private capital outflows to other regions. 0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Source: Preqin (2022c), data as of 23 September 2022.
Note: Region of origin refers to location of the funds’ headquarters.

Infrastructure Monitor 2022 64

Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

Capital investment continues to provide high returns, attracting yet more private capital
for infrastructure.

• Favorable risk-adjusted returns have continued to attract investor funds into Net internal rate of return (IRR) on private infrastructure capital by fund (%)
infrastructure. Growth in private capital available for infrastructure is partly
due to high returns on these investments. 450

• On average, funds earned a net internal rate of return (IRR) of 14.3% on

invested private infrastructure capital, including earnings plus value of
the assets held. The returns varied widely between different funds – 100

Net internal rate of return (%)

the maximum net IRR was 448.0%, driven by higher return expectations
fueled by the strong performance of the global commodities market.
• Despite recent increases in market uncertainty in the current economic Average = 14.3%
50
climate, the median net IRR has remained around 10% over the Median = 10.1%
preceding decade. Median net IRR also remained the same across Weighted average = 6.9%
Standard deviation = 31%
sectors and regions.
• Returns on invested capital increase the pool of capital available 0

for reinvestment.

-50

Funds

Source: Preqin (2022e).

Note:Net IRR is based on realised cash flows as well as the valuation of unrealised assets. These data present net IRRearned by
a fund to date (July 2022), after fees and carry, for 280funds following aninfrastructure investment strategyforwhich net IRR
estimates are available.

Infrastructure Monitor 2022 65

Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

The greater market value of infrastructure funds’ investments reflects greater availability of capital
but also greater dry powder.

• The total market value of infrastructure AUM has grown rapidly from USD170 Cumulative infrastructure assets under management, by component, 2010–2021
billion in 2010 to USD1 trillion in 2021 and is poised to reach USD1.87 trillion by (USD bn)
2026 (Preqin (2022g)). This growth indicates that private investors continue to 1200
increase allocations of capital to infrastructure assets.
1,002
• There are two components to infrastructure AUM: 1000

1. The biggest component, investment value, has increased seven-fold from 811
USD97 billion in 2010 to USD704 billion in 2021. Investment value is the market 800
30%
value of portfolio investments in primary and secondary markets (including 675
mark-to-market gains).

USD bn
600 563
36%
2. The second component, dry powder, has quadrupled from 2010 (USD72 480
34%
billion) to 2021 (USD298 billion). Dry powder includes capital committed by 396
400 34%
331 35%
investors and available to fund managers but not yet invested or allocated. 281 302
228 38%
Capital committed is the sum of unallocated capital and portfolio returns, 216 35%
32%
200 169 39%
minus any disbursements to investors. The current record level of dry powder 40% 34%
43%
translates into a greater capacity to deploy capital in the short to medium
57% 60% 66% 61% 65% 68% 62% 65% 66% 66% 64% 70%
term as new infrastructure investment opportunities arise, especially in a 0
post‑pandemic era with rising interest rates. Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec Dec
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
While dry powder levels are at their highest, in relative terms, dry powder as
a percentage of AUM has gradually declined from a high of 43% in 2010 to
Dry powder Investment value
30% in 2021, indicating that a higher percentage of AUM has been deployed
towards infrastructure investments. Source: Preqin (2022g), data as of 7 July 2022.
Note: ‘Dry powder’ refers to capital committed by investors that has not been invested or allocated. Capital committed is the
sum of unallocated capital, invested capital, and portfolio returns, minus any disbursements to investors. Preqin’s measurement
of dry powder includes only close-ended funds, i.e. funds that issue a fixed number of shares through a single initial public
offering (IPO) to raise capital for initial investments.

Infrastructure Monitor 2022 66

Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

Some regions have attracted more infrastructure AUM than others.

Cumulative infrastructure assets under management, by component and region, 2010–2021

(USD bn)

450
North America Europe Asia Diverse Multi Regional Latin America Africa Oceania

400

350

300

250
USD bn

200

150

100

50

0
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Investment values (bottom) Dry powder (top)

Source: Preqin (2022f), data as of 7 July 2022.

Note: Based on the location of investment focus.

Infrastructure Monitor 2022 67

Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

Limited availability of projects and high hurdle rates have led to a significant accumulation of
dry powder, mostly in North America and Europe.

• There are several possible reasons that available funds are not deployed: Cumulative infrastructure dry powder by region, 2010–2021
(USD bn)
– The limited availability of bankable infrastructure projects creates a level of
350
demand that exceeds supply of projects. A globally uneven distribution of
bankable infrastructure projects exacerbates the shortage of projects.
300
– High hurdle rates of infrastructure funds constrain fund managers from
investing in infrastructure assets. 250

– Trends in hurdle rates have not aligned with trends in returns over time.
200
An analysis of 25 funds established between 2005 and 2021 inclusive,

USD bn
reveals that hurdle rates remained at 8% for over a decade across regions
and sectors. 150

• North America and Europe have experienced a sustained increase in dry powder 100
since 2010. Between 2010 and 2019 these two regions held around 80% of
global infrastructure dry powder, a share that increased to more than 86% in
50
2020 and 2021.
• The current record levels of dry powder provide opportunities for the 0
capital raised to be deployed more quickly as new infrastructure investment 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
opportunities arise, especially in a post-pandemic era with rising interest rates.
However, while dry powder represents possibility, it also signifies pressure to North America Europe Asia Multi-regional
allocate those funds, which could lead to investing at elevated prices.
Latin America Africa Oceania

Source: Preqin (2022f), data as of 7 July 2022.

Infrastructure Monitor 2022 68

Global Infrastructure Hub A G20 INITIATIVE

Availability of private capital for infrastructure

Private capital raised for greenfield infrastructure projects is harder to invest than capital raised for
brownfield and secondary projects.

Globally, infrastructure funds that targeted only greenfield projects accumulated the highest presented higher risk. This indicates that accelerating greenfield infrastructure investments
share of dry powder in AUM over time, due to the lack of bankable and investment-ready requires more risk mitigation than is currently in place, as well as a higher level of support for
infrastructure projects in the pipeline. Volatility in returns was greater for funds that focused on infrastructure project preparation. A focus on project preparation can help optimise returns and
greenfield infrastructure investment than for funds that targeted only brownfield or secondary reduce risks on greenfield projects.
infrastructure investments. While greenfield projects offered higher returns, they also

Metrics for a sample of infrastructure funds by project stage

Dry powder Return Risk

(% of AUM) (Average net IRR (%)) (Standard deviation of net IRR (%))

Greenfield only 43 14 17

Brownfield only 19 10 11

Secondary only 18 10 14

Source: Preqin (2022d).

Note: This analysis is based on 136 funds that were classified to be investing in only greenfield projects (41), only brownfield projects (47), and only secondary projects (48) within the infrastructure asset class and with similar average vintage year, as of
June 2022. Outlier funds have not been considered, to avoid distorted results. Net internal rate of return (IRR) is the money-weighted return expressed as a percentage. Net IRR uses realised cash flows after fees and carry, distributions, and value of
unrealised assets to derive return earned by a fund manager to date. The estimates were either reported directly by the fund or calculated by Preqin. Return is measured by the average of Net IRR earned by funds, while risk is measured by the standard
deviation of the net IRR earned by all constituent funds within selected parameters (taken as a single group).

Infrastructure Monitor 2022 69