We could see a $500 billion a year gap between global infrastructure investment needs and available public sector funds between now and 2030.

This is according to a new report by Standard & Poor’s Ratings Services. The study entitled “Global Infrastructure: How To Fill A $500bn Hole” found that institutional investors will likely increase their allocations to help fill the gap left by governments and banks. It estimates that funding needs for infrastructure worldwide will be over $3 trillion annually over the next 16 years.

The report estimates that,over the next five years, private sector investments in infrastructure worldwide could rise to an average of approximately 4% of assets under management. This is more than double the current level and could potentially provide the sector with $200billion per year in additional funding. This, together with a continuation in bank lending at the current level of $300billion yearly, could fill the void.

According to the study, some institutional investors have already raised their infrastructure target allocations to between 3% and 8% of their assets under management. It is expected that the match these assets can offer against their long-term liabilities and the higher yields available on infrastructure debt will attract other institutions to increase their commitments.

Lead author of the study MD Michael Wilkins believes that there is a massive need for infrastructure investment worldwide. “The attractions of the asset class are clear and the appetite of investors for infrastructure assets is growing. All that is needed for more institutions to get involved are the right conditions and incentives,” he says. Wilkins believes that clearer pipeline of projects, more standardisation of deal structures, policy stability and better information about the performance of projects at their various stageswould all encourage infrastructure debt investment.