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According to the latest Mercer Investments Large Asset Owner Barometer report, infrastructure is the leading asset class that the most respondents plan to target for increased investment in 2024.
Infrastructure is a component of real asset investing that focuses on the distribution of goods, people, and resources. Examples of economic infrastructure assets include ports, airports, tollroads, bridges, energy distribution networks, and data centers. Examples of social infrastructure include education facilities, hospitals, and government buildings. Broadly speaking, infrastructure assets provide essential services, and produce consistent predictable cash flows, often with built in inflation protection.
Across the different sub sectors of infrastructure, there are potential investments to fit a wide range of risk and return profiles. At one end of the spectrum, core infrastructure investments include secondary stage investments into fully operational assets that are essential to the economy, and generate return mainly from current yield. At the other end, opportunistic investments include brownfield assets that require additional capex, and involve new construction or development of assets that generate most of their returns from capital appreciation. In between there are value add and core plus strategies that involve a mix of established assets and potential expansions, and generate a mix of current yield and capital appreciation.
Many infrastructure assets were traditionally purely government funded, but in recent decades, more infrastructure has been financed with private capital. Australian investment banks such as Macquarie were early pioneers of infrastructure investing. Back in the 1990s, Australian pension funds started investing in specialist infrastructure investing funds A few years later, Canadian pension funds started to invest in infrastructure. It’s in the most recent decade, however, that US investors have started to get major exposure to infrastructure investing.
Initially, infrastructure exposure was only available to institutional investors, but in recent years, more options for retail investors have come to market.
Traditionally, infrastructure investment vehicles have had the challenging “J-curve”, in which a project can generate small negative returns for several years while a project is developed. Managers can mitigate the J-curve by investing into existing infrastructure on the secondary market, either through operating companies, or other investment funds. Only recently has the secondary market for infrastructure assets become robust enough to make it possible for fund managers to offer infrastructure exposure in evergreen investment structures with intermittent liquidity such as interval funds.
There are currently three interval funds specifically focused on infrastructure , and several more that inclure infrastructure as part of a broader real asset exposure.
|Meketa Infrastructure Fund
|1.50% of net assets
|Stepstone Private Infrastructure Fund
|1.60% of net assets
|Cantor Fitzgerald Infrastructure Fund
|$2,500 regular accounts /$1,000 retirement accounts
|1.50% of net assets
Meketa Infrastructure Fund
Meketa Investment Group launched the Meketa Infrastructure Fund in January 2024. FundFire, The Wall Street Journal, and the DI Wire all covered the launch. This fund will focus on private infrastructure assets. Through its portfolio planning process it will determine the allocation across different subsectors and geographies that is likely to achieve the most consistent returns with the lowest volatility.
Meketa’s new infrastructure interval fund is offering three share classes. The minimum investment is $1 million for Class I shares, $50,000 for Class II shares, and $25 million for Class III shares. Class I shares have a 0.10% Shareholder Servicing Fee. Class II shares have a 0.25% Distribution and Service Fee. Class III shares do not have a Distribution or Servicing Fee. The fund will charge a management fee of 1.50% of net assets. The Fund has an expense limitation agreement set at 2.00% for Class I Shares, 2.15% for Class II shares, and 1.90% for Class III shares.
Based in Boston, Meketa is an employee owned, full service investment consulting and fiduciary management firm. It advises institutional investors such as pension funds and has $1.8 trillion in assets under advisement. The newly formed Meketa Capital division will aim to provide alternative investment funds through RIAs and other intermediaries. Mekata Infrastructure Fund is the first offering from Meketa Capital that targets the RIA channel.
Stepstone Private Infrastructure Fund
The Stepstone Private Infrastructure Fund launched in July 2023. The Animal Spirits podcast recently featured an interview with Bob Long, the CEO of StepStone Private Wealth. In this interview they discuss the unique opportunities in infrastructure, and StepStones investing strategy.
Stepstone’s infrastructure interval fund is focused on secondary investments. The following graphic shows Stepstone’s target allocation:
Stepstone Private Infrastructure Fund has four share classes: Class T, Class S, Class D, and Class I. Class T and Class S have a sales load of up to 3.5%. Class T and Class I have no sales load. Class T, S and D will have shareholder servicing fees of 0.85%, 0.85%, and 0.25% respectively. In contrast, Class I Shares do not have any distribution or servicing fee. The minimum initial investment for Class T, S, and D is $25,000. For Class I shares the minimum initial investment is $1 million. The annual management fee is 1.60% of net assets. The Fund currently has an expense limitation setting a cap for total expenses at 1.0% of net assets(not including the management fee).
Stepstone Group is a global private market firm providing customized investment, portfolio monitoring and advice to investors. It currently has $146 billion in AUM. Stepstone Group is listed on NASDAQ with the ticker symbol STEP.
Cantor Fitzgerald Infrastructure Fund
Cantor Fitzgerald Infrastructure Fund Launched in June 2022. This fund invests in a portfolio of private institutional infrastructure investment funds as well as public infrastructure securities, As part of its objective, it seeks to invest in issuers that are helping to address the United Nations Sustainable Development Goals through their products and services. It also focuses on three global megatrends: (1) digital transformation (2) energy transition and (iii) the enhancement of aging infrastructure.
This is a summary of how Cantor Fitzgerald allocates capital for its infrastructure interval fund:
Cantor Fitzgerald Infrastructure Fund has three share classes: Class A, Class C and Class I. The minimum investment for Class A and Class C shares is $2,500 for regular accounts, and $1,000 for retirement plan accounts. Class I shares have a $1 million minimum investment. In terms of up front costs, Class A shares have a 5.75% sales load. In contrast, Class C and Class I Shares do not have any sales load. Class A has a 0.25% shareholder servicing fee. Class C has a 0.25% shareholder servicing fee, plus a 0.75% distribution fee. In contrast, the Class I shares have neither a shareholder servicing nor a distribution fee. The management fee is 1.50% of net assets. The fund has an expense limitation agreement setting a cap for total expenses at 2.25% of net assets.
Cantor Fitzgerald is a financial services firm founded in 1945. It specializes in institutional equity, fixed-income sales and trading. It also serves the middle market with investment banking services, prime brokerage and commercial real estate financing. Cantor Fitzgerald’s real assets and private markets business includes Cantor Fitzgerald Income Trust, a publicly registered NT REIT. It also offers several tax-advantaged real estate strategies, along with equity and multi-asset investment products.
Other Real Assets Interval Funds
In addition to the three funds outlined above, there are several interval funds that invest in infrastructure as part of a broader real assets strategy. Here are a few examples:
- Versus Capital Real Assets Fund launched in August 2017. It has over $3 billion in net assets as of the most recently available public filings. Its portfolio is about 80% private investment funds, many of which are infrastructure focused. It also invests in timberland and agriculture assets in public and private markets.
- CIM Real Assets and Credit Fund launched in April 2020. It has $300 million in net assets of as of the most recently available public filings. It invests in bank loans, CLOS, and commercial mortgages, and its portfolio includes some infrastructure credit assets.
- First Trust Real Assets Fund launched in June 2022, and has just over $20 million in net assets. Its portfolio includes private real estate equity(~55%) and private real estate debt(45%). Its investment strategy includes some selective exposure to infrastructure assets.
Categorizing Infrastructure Investment Funds
Infrastructure investing is a nascent subsector of the alternative investments industry. As the CAIA Association notes in a paper on infrastructure investing, there is no universal agreement on how infrastructure investments should be categorized. Some investors treat infrastructure as an independent category, while others treat it as a subpart of private equity or real estate funds. Across Interval Fund Tracker’s various data products, we currently have infrastructure funds classified as either real estate or private equity, depending on how they describe their investment plan in the prospectus. Premium Members with access to the Fee Comparison Download can always search for “Infrastructure” in the Investment Strategy description if they want to build their own peer groups for comparison and analysis.
However, you categorize them, infrastructure interval funds are a growing niche worth watching.
Infrastructure as an Asset Class CAIA Association
An Introduction to Infrastructure Investing Hamilton Lane
Infrastructure Primer Meketa Group
Infrastructure’s Middle Market: An Emerging Opportunity Stepstone Group
Global Infrastructure an Overview Cantor Fitzgerald