much of the EMDE infrastructure gap institutional investors might realistically be able to fill can be gleaned. Expecting flows of around USD $1 trillion building over several years would not be unreasonable. Though not sufficient to solve the problem alone, this could certainly prove an important source of new capital to help fill in the EMDE infrastructure financing gap.

**Table 1: Current and Potential Allocation of EM Institutional Investors to EM Infrastructure**

|**Institutional**<br>**Investors**|**AUM USD $**|**Current**<br>**Investment in**<br>**EMDE**<br>**Infrastructure**|**Potential**<br>**Investment in**<br>**EMDE**<br>**Infrastructure**|**Comments**|
|---|---|---|---|---|
|**OECD**<br>**Institutional**<br>**Investors**|79 trillion +|<1% = total<br>leading investors<br>c10%<br>most in domestic<br>markets|1% assets = $750<br>billion|WEF (2011) breakdown of<br>institutional investors AUM to<br>truly long-term capital = $6.5<br>trillion<br>Around 1% of this implies c$50<br>billion target<sup>12</sup>|
|**Emerging**<br>**Market**<br>**Institutional**<br>**Investors**|4.5 trillion<br>NB growth<br>potential – e.g.<br>EM pension<br>funds currently<br>$2.5 trillion<br>AUM estimated<br>to rise to $17.4<br>trillion by2050|Even more limited<br>than leading<br>OECD investors<br>Chilean pension<br>funds 1.5%<br>|1% assets = c$50<br>billion|This target could be much higher<br>as many EM institutions can only<br>invest in domestic markets|
|**Sovereign**<br>**Wealth Funds**|4 trillion|0-5%<sup>~~13~~</sup>|c5% assets =<br>c%250 billion|Many of new EM SWF being set<br>up to specifically invest in<br>domestic infrastructure|
|**EM pension**<br>**reserve and**<br>**social security**<br>**funds**|1 trillion|Limited – ad hoc<br>examples (up to<br>10%)|10% assets =<br>c$100 billion|High target as these funds are<br>often the largest single source of<br>capital in a developing country|

Source: authors (from references)

> 12 (TUAC 2012) contains an interesting exercise in estimating the potential flows from institutional investors to finance climate change related investments – though the numbers could equally be applied to emerging market infrastructure.  The AUM of large OECD DB pension funds and pension reserve funds is estimated at $15 trillion. Total portfolio growth is estimated at 2.5% year nominal 2013-2050. AUM. An allocation to infrastructure funds is assumed at 0.2% year 2013-2025 and 0.1% 2025-2050 – giving a total exposure remains below 5% Allocation to infrastructure bonds is estimated at 0.75% initially, falling gradually to 0.1% year, to give a total exposure of around 10%. This gives flows in the order of $150bn tapering off in subsequent years. Total flows amount to around $2 trillion out to 2030 then add a further USD$3-4 trillion.

> 1356 percent of SWFs invest in infrastructure, according to Preqin (an infrastructure database) with investment volumes of about US$55bn between 2005-2012 implying asset allocations around 1 percent (TheCityUK 2013). Between 2007 and mid-2012, about US$ 26bn were invested by SWFs in foreign infrastructure assets, with Europe being by far the most popular destination (US$ 16bn). The picture is mixed in terms of sectors and preferred vehicles (Barbary 2013).

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