Just under two-thirds of infrastructure funds charge management fees of 2% on funds that are currently raising or that have closed in the recent past despite pressure for lower fees from investors with 62% believing that management fees are too high.
The data was collected as part of the 2011 Preqin Infrastructure Review, which investigates the alignment of interests between investors and fund managers.
According to the research, 51% of investors interviewed for the study believe that interests between fund managers and investors are not properly aligned; this is an improvement from 72% who believed the same in June 2010. Management fees and carry structures are the areas where there is the most dissatisfaction; 62% and 53% of investors cited each area respectively.
Frustration with management fees meanwhile has declined since 2010 when 72% believed them to be problematic. Some 56% take issue with paying fees on un-invested capital and 42% are unhappy with hurdle rates, however investors are increasingly satisfied with the interaction they have with their fund managers; the proportion that stated there needed to be an improvement fell by 12 percentage points from 2010 levels to 13%.
Of those surveyed, 28% felt that fund managers need to make greater contributions to their own funds, compared to 45% in 2010, while 70% of investors are planning to make further commitments to infrastructure funds in the next 12 months.
“The outlook is generally good for the infrastructure asset class, with almost three-quarters of investors planning to make further fund commitments in the coming 12 months. The study suggests that there is a better alignment of interests between investors and fund managers and there has been a significant drop in the proportion of investors believing that interests need to be better aligned," says Elliot Bradbrook, Manager – Infrastructure Data at Preqin. "However, there are still clearly issues, especially surrounding management fees. Further development of the asset class will be dependent on the successful resolution of these issues and improved co-operation between fund managers and investors."
