The world’s largest pension funds have significantly increased their allocations to alternative investments over the last four years. But allocations to infrastructure haven’t followed that upward trend, according to an OECD report.
Reported by Pensions & Investments:
Infrastructure investing activity remains low among the largest pension funds and public pension reserve funds worldwide, despite increased allocations to other alternative investments, a report from the Organization for Economic Co-operation and Development showed.
Average allocations to alternatives increased to 19.5% from 17.6% between 2010 and 2013 among the 10 largest pension funds surveyed, while infrastructure allocations were more stable. Of the 71 funds that responded to the OECD survey, unlisted equity and debt infrastructure investments totaled $80 billion, or 1% of total respondent assets, at the end of 2013, up slightly from $72.1 billion, or 0.9% of total respondent assets, at the end of 2012.
Mr. Paula and Raffaele Della Croce, lead manager on the OECD’s long-term investment project and co-author of the report, attributed the slow uptake to unstable regulatory frameworks and a lack of bankable projects.
“Pressure is on the policy side to provide the right conditions for investors to accept infrastructure,” Mr. Della Croce said in a telephone interview.
Although infrastructure investment activity remains low, plan executives are expressing interest in the asset category.
Large pension funds like the €20 billion ($24.5 billion) Etablissement de Retraite Additionnelle de la Fonction Publique, Paris, and $28 billion Afore Banamex, Mexico City, plan to establish new target allocations to infrastructure, according to the report.
Read the full OECD report here.