Infrastructure, Investments

Growing SMSF demand for unlisted infrastructure

A wholesale unlisted infrastructure fund is gaining strong demand from SMSFs.

SMSFs are showing a strong appetite for the unlisted infrastructure, now that access to this asset class has opened up, according to Infrastructure Partners Investment Fund (IPIF) Management.

“Our core fund was launched to facilitate investments for smaller investors, such as SMSFs, into unlisted infrastructure after realising there was this gap in the market where this growing pool of capital didn’t have access to the same type of unlisted investment opportunities as the big super funds did,” IPIFM executive director Nicole Connolly told selfmanagedsuper.

“We’ve grown to about $115 million in funds under management and approximately 50 per cent of our capital is from SMSF investors so there’s strong and growing demand for this asset class.”

Connolly said historically, SMSFs have not had exposure to unlisted infrastructure due to access barriers.

“The minimum investment size has been between $5 million and $25 million so in the past, it’s been completely prohibitive,” she said.

“Our wholesale fund is open to qualified sophisticated investors and there are varying degrees of sophistication of SMSFs in the market.

“But typically they understand that unlisted infrastructure is a longer term opportunity and there’s a degree of illiquidity so most are taking a very prudent approach to investing in unlisted infrastructure by allocating anywhere between 5 per cent to 10 per cent of their portfolio in the asset class.”

She revealed IPIF’s SMSF investor base is mixed in profiles and age.

“Our view is you need a five to seven-year timeframe to invest in unlisted infrastructure,” she noted.

“And we have relationships with advisers and wealth management firms but many SMSFs do come to us directly, through word of mouth.

“SMSFs are attracted to unlisted infrastructure because a lot of their portfolios are dominated by equities, cash and property, so infrastructure acts as a good diversifier to a typical SMSF portfolio – it provides consistent and reliable income, lower volatility as it’s unlisted, and those diversification benefits.”

Connolly said while there are hybrid funds in the market, both unlisted and listed, she believed there could be more true unlisted infrastructure funds that emerge due to the demand from smaller investors.

“There are only about six to eight unlisted infrastructure funds in the market that exist and they’ve had such strong support from the large institutions that they haven’t really needed to tap into other sources of capital, such as SMSFs,” she explained.

“However, I do think this will change going forward as a lot of large super funds are now going direct into infrastructure and building their own internal teams so we may see that shift.

“With the funds we tap into, there’s definitely a willingness by them to tap into the SMSF market but it’s a difficult market for them to access.

“Given the pipeline of opportunities in infrastructure, there are no capacity constraints so we can meet the growing demand of the SMSF investor.”

IPIF Core has returned just over 9 per cent per annum since inception in 2015.

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