International pension funds and Sovereign Wealth Funds have been increasingly allocating capital to infrastructure. The capital flowing into the asset class has not been met by an equivalent supply of assets and this has resulted in both a significant build up of undeployed capital and also inflated prices being paid for those assets that have been transacted.
Investors who have traditionally been focussing purely in the private market for assets are starting to turn their attention to the listed market, where similarly high quality companies are available. The listed market offers these investors a lower price for equivalent assets and significantly easier capital deployment.
For investors in the listed infrastructure sector, this trend provides both the possibility of a sale at a high price to an unlisted bidder or, in the event of a market correction, provides the potential that investors will acquire any assets at closer to fair value, should they fall too far in price. Hence investors in the listed infrastructure market can participate in the upside, whilst having a level of protection on the downside provided by pent up capital in the unlisted infrastructure sector.