According to the Sovereign Wealth Fund Institute (SWFI), large Middle Eastern sovereign wealth funds (SWFs) are expected to increase their infrastructure allocations this year.
SWFI transaction data for 2021 has revealed that the sovereign wealth funds and public pension plans made a record number of direct investments into the infrastructure sector.
Sovereign funds and public pensions invested $36.4 billion in infrastructure in 2021, compared to $10.65 billion in 2020 and $17.94 billion in 2019. This analysis has excluded infrastructure debt in order to focus on infrastructure equity.
“Wealth funds and large public pensions rotated some assets out of public equities in late 2020 and aggressively targeted real assets. Toll roads, roads, and rail investments have also increased in proportion reaching $11.63 billion in 2021 or about 32 percent of all infrastructure investments,” as per the SWFI research.
The COVID-19 pandemic triggered the world’s worst economic downturn in nearly a century, prompting forceful intervention from central banks and governments. The stimulus created excess inflation as a result, which has forced more asset owners to seek out unlisted infrastructure to protect and grow their wealth.
While airport investing was a major theme for sovereign wealth and public pension capital pre-pandemic, the means of transportation and railways have been leading the charge, especially in 2021, as per the reports.
The SWFI asset allocation data has stated that the Middle Eastern sovereign wealth funds and public pensions have goals to hit asset allocation targets in infrastructure. Many of these institutional investors go through funds, but the larger pools of capital seek co-investment opportunities.
According to the report, “These sovereign investors are trying to avoid mass piles of capital in various infrastructure investments in markets such as Asia, Australia, Europe, and the US Emerging market countries like Indonesia and Turkey.”