A report issued by global
private equity advisor Altius Associates reportedly forecasts that
institutional investors are set to increase their allocations to infrastructure
funds from 1 percent to 5 percent of total assets over the next decade.
If such a prediction comes to pass, that’s good news for California
infrastructure.
The press release announcing the report, which is only available to
the firm’s clients, doesn’t get into actual dollar numbers, but a quick look at
the state of California’s employee pension fund, one of the largest in the
world, provides an interesting hypothetical example.
As of Jan 31, 2013, the $248.8 billion fund had invested $3.2 billion
in infrastructure (which it groups as an asset class with forestry). This
represented a one percent allocation within its total investment
portfolio. If the Altius prediction is correct, CalPERS might reasonably
be expected to invest at least that amount purely in infrastructure and to grow
that allocation to more than $12 billion by 2023. Not all of this money
would be invested in the state but, in 2011, CalPERS did commit to invest $800
million over three years solely in California infrastructure.
And CalPERS is not the only institutional investor eyeing California
infrastructure. The state has strong appeal for both domestic and foreign
funds because of the size and strength of California’s economy.
Of course, creating a robust P3 sector to handle investor demand and
provide good projects for investment will be critical for the state’s ability
to attract institutional investors as those allocations increase.
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