KEY FINDINGS OF THE 2024 INSTITUTIONAL INFRASTRUCTURE ALLOCATIONS MONITOR

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1. Average target allocations to infrastructure are at 5.50%, up 42 bps in 2024. Allocations to infrastructure continue to grow at a healthy pace. The 42 bps increase year-over-year implies the potential for institutional allocations to increase by approximately $0.5 trillion based on an estimate of global institutional AUM. Canadian institutions report the highest average target allocation at 12.6%, followed by the U.S. at 5.4%.
    

2. Institutions remain under-allocated to infrastructure, at 123 bps below target allocations. While the pace of new investments decelerated in 2023, actual allocations grew by 76 bps in 2023 (for repeat survey participants), in part attributed to the outperformance of infrastructure versus returns for other asset allocations. Institutions in EMEA have the highest level of under-allocation at a margin of 160 bps.
    

3. Infrastructure portfolio returns moderated to 7.1% in 2023, amidst a challenging macroeconomic environment. Trailing three-year average return at 10.1% exceed long-term targets by 78 bps, supported by “inflation participation.” The trend of moderating returns is consistent across all regions. Institutions in the Asia Pacific region achieved the highest returns in 2023 at 8.6%, while institutions in The Americas have seen the highest average trailing three-year return at 10.9%.
    

4. Globally, higher returning Value-Add and Core+ infrastructure strategies remain in favor. Institutions in The Americas have the greatest appetite for higher return strategies, favoring Value-Add infrastructure investments. Core investments remain out-of-favor. Public Pensions are the only institutional investor type with growing interest in Core year-over-year.
    

5. North America remains the region of investment preference for global infrastructure investors. While appetite for investing in North America has declined slightly year-over-year, 32% of investors expect to grow allocations to North America in 2024. Notably, 12% of institutions indicate that they are “considering, but not yet invested” in North America. Interest in investing in Europe grew year-over-year, with 25% of institutions expecting to be more actively allocating to the region in 2024.
    

6. Asset valuations are the top concern for infrastructure investors, with concerns regarding interest rates and capital markets volatility declining year-over-year. The shifting focus to asset valuations may be attributed to concerns regarding a “higher-for-longer” interest rate environment and the impact of interest rates on valuation metrics and discount rates. Further, institutions are increasingly concerned about the ongoing challenges facing investment managers with exposure to floating rate and short-term debt.
    

7. Institutions are most likely to increase exposure to Digital Infrastructure among the four major infrastructure verticals. Digital strategies remain in favor, with continued strong demand for data center investments. Demand for social infrastructure is weakest among the major infrastructure verticals for the second consecutive year, while 72% of institutions report that they are either not investing or investing less capital in Oil & Gas.
    

8. Appetite for energy transition infrastructure remains strong and is expected to grow over the next several years. Approximately 36% of respondents indicate a plan to increase allocations to renewable energy and storage, outpacing other Energy subsegments. “New energy transition,” which by example includes green hydrogen and carbon capture, is the second most desirable energy strategy, with 26% of institutions planning to increase their investment pacing.
    

9. Institutions continue to show preference for established managers, with appetite for first-time funds and emerging managers remaining limited. Mega-cap managers continue to dominate fundraising, as institutions continue to show preference for re-upping capital allocations to current relationships. Newer managers are at a particular disadvantage, with 77% of institutions reporting that they are “very unlikely” (53%) or “somewhat unlikely” (24%) to invest with a first-time fund or emerging manager.
    

10. While fundraising has remained challenging, allocations to co-investments remain robust. SWFs and Public Pensions demonstrate the greatest appetite for co-investment. Nonetheless, private funds remain institutions’ preferred route for accessing the infrastructure asset class, with 72% of investors actively allocating capital to commingled, closed-end vehicles.
     

11. Investor sentiment, measured through average conviction, remains strong. Institutions indicated an average conviction score of 7.0 out of 10, a slight increase compared 2023 despite continued market volatility. Public and Private Pensions continue to show the greatest conviction for infrastructure investments. Endowments and Foundations were the only institutional investor type to report a decline in conviction year-over-year.
     

12. Globally, 89% of institutions consider ESG at least "slightly important" in their investment decisions, reflecting a 5% year-over-year increase. About 57% of institutions have implemented a formal ESG policy, and over 70% consider ESG outcomes in their diligence processes and investment decisions. Regional differences in ESG definitions, integration, and reporting requirements remain significant.