US fund managers spoken to by AsianInvestor report that while US pension funds and insurance companies are increasingly active in US infrastructure investment, demand is strongest from Asian institutions.

“Everybody is talking about infrastructure,” said James Cowan, head of Macquarie’s investor solutions group for the Americas.

Cowan observes that Asian investors are moving into real assets or inflation-linked type allocations to infrastructure, timber, commodities, real return bonds and real estate. He describes it as “a massive evolution” among investors.

But Cowan says that in terms of global allocations “in some ways, the US is a little behind on this.” The supply available to global capital is surprisingly small for such a big economy. “If you look at the UK, Australia or Canada, people say how advanced those countries are in terms of infrastructure investing. But those markets are just not that deep and if you start to get into any specialised area it becomes even smaller.”

Changing the opportunity set in the US is hard because government decisions are decentralised. State and municipal governments own many of the airports, waste treatment plants and other sectors that private capital would otherwise look at.

As AsianInvestor has reported, Chinese institutions have lost their appetite for adding more US Treasuries, which is driving them to explore real estate or infrastructure instead.

Chinese capital often experiences a pushback from the US, as well as from Australia or Canada, for taking direct stakes in assets. Collin Bell, managing director of fundamental equities at Goldman Sachs Asset Management in New York said Asian clients are exploring US real-estate investment trusts, as well as listed vehicles for energy infrastructure.

“We’ve seen close to $2 billion of net inflows into our liquid real-asset franchise year to date,” Bell said. “Roughly $1.5 billion has come from foreign investors, and most of that has come from Asia.”

Markets with low or negative interest rates, such as Japan, have been leading the charge.

Tax changes (the so-called FIRPTA tax) in the US have further boosted demand from overseas. Foreign qualified pension plans are now taxed the same as US funds. Bell said that partly explains Qatar Investment Authority’s $640 million investment in the Empire State Reit (which owns the iconic Empire State Building).

He predicts listed infrastructure will enjoy the same inflows of assets as Reits have enjoyed over the past two decades. Since 1991, US Reit market cap has experienced a 20% compound average growth rate, he said.

“Global infrastructure is now half the size of global Reits,” he noted.