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infrastructure funds lag on fee structure

Institutional investors are more dissatisfied with the charging structures of infrastructure funds than those in any other alternative asset class, according to a survey by data provider Preqin


The poll found that 49% of investors disagreed or strongly disagreed with the statement that infrastructure fund managers’ interests were “properly aligned” with those of end clients. This compared with 36% for hedge funds, 33% for private equity and 28% for private real estate.

While investors said they would like infrastructure managers to move away from the private equity-style “two-and-twenty” fee model, Preqin noted that some 61% of 2012/2013 vintage funds and those currently being marketed charge a management fee of 2% or more.

Nevertheless, about two-thirds of investors said they had seen a positive shift in infrastructure fund terms during the previous year – continuing an improvement since June 2010, when almost three-quarters were unhappy with the alignment of manager and client interests.

“It is vital that fund managers are able to effectively articulate the reasoning behind the fees being charged, and continue to consider the appropriate structure of the terms and conditions employed [by] their funds in order to align interests effectively and achieve success in the competitive fundraising market,” wrote Preqin infrastructure data manager Elliot Bradbrook.

A PDF of the study can be downloaded from Preqin’s website, here.