The latest research from Preqin finds that management fees among infrastructure funds of more recent vintages are lower than for previous vintage years.
While 2012 and 2013 vintage funds have a median investment period management fee of 2.00 per cent, funds currently in market, or with a 2015 vintage, have a median fee of just 1.50 per cent. Among 2014/15 vintage funds, 37 per cent charge a management fee of 2.00 per cent, but this is down from 61 per cent of 2012/13 vintage funds. Twenty-seven per cent of 2014/15 vintage funds charge less than 1.50 per cent in management fees, up from 20 per cent of 2013/14 vintage funds.
Larger infrastructure funds currently raising capital, or with a 2014/15 vintage, have a lower median investment period management fee than their smaller counterparts. The median fee is 1.50 per cent for funds with USD1 billion or more in assets, while for funds with less than USD500 million the median fee is 2.00 per cent. 

Eighty-three per cent of investors have frequently or occasionally decided not to invest in a fund due to its proposed terms and conditions. Only 27 per cent of investors believe that proposed fund terms have changed in their favour over the past 12 months. 

The lower management fees observed by Preqin are in line with the risk/return profile of the infrastructure asset class. A reliable income stream and low correlation to other asset classes are cited by 54 per cent and 46 per cent of investors respectively as main reasons for investing in infrastructure. 

The proportion of infrastructure investors who believe that their interests are aligned with those of managers is increasing. In H1 2015, 85 per cent of investors reported that their interests were aligned, up from 51 per cent in June 2013.

“In an increasingly competitive unlisted infrastructure fundraising market, investors are more discerning than ever regarding where they place their capital,” says Andrew Moylan, head of Real Assets Products at Preqin. “A delicate balance now exists between appropriate compensation for performance and maintaining investor satisfaction the fees they are charged; for fund managers, getting this balance right could be an important factor in their ability to raise capital. While the private equity fee model may be better suited to higher risk/return strategies, including some higher-risk infrastructure strategies, most institutional investors are looking for fees to reflect the types of assets being invested in and the levels of returns expected when gaining exposure to lower risk/return infrastructure assets.”
