Financial advisers and retail-class investors have limited access to the developing asset class, but the potential for expansion is significant, according to industry sources.

“The retail market is a logical direction, because the market is bound to expand and get more efficient,” said Steve Foresti, managing director with Wilshire Associates Inc. in Santa Monica, Calif.

So far, direct access to the market has been restricted largely to institutions and wealthy individual investors, but individual investors can participate through a handful of registered investment vehicles designed to offer exposure to the asset class.

Two closed-end mutual funds were introduced more than a year ago by Macquarie Infrastructure Management (USA) Inc., a New York-based unit of Macquarie Bank Ltd., based in Sydney, Australia.

Macquarie Global Infrastructure Total Return Fund Inc. (MGU) and Macquarie First Trust Global Infrastructure Utilities Dividend and Income Fund (MFD) both had gained more than 22% this year through May 16, compared with a return of 6.7% for the Standard & Poor’s 500 stock index. Macquarie Global Infrastructure Total Return Fund had gained 39.9% in 2006.

State Street Global Advisors in Boston jumped into the market Jan. 31 with an exchange traded fund, the SPDR FTSE/Macquarie Global Infrastructure 100 (GII), which is designed to track the Macquarie Global Infrastructure 100 Index.

The ETF was up 6% from its late January launch through May 16.

“There is clearly an appetite for infrastructure investing, particularly among intermediaries,” said Anthony Rochte, senior managing director at SSgA, which controls about 25% of the domestic-ETF market, with $107 billion under management in 53 funds.

Macquarie Infrastructure Management, a global leader in infrastructure investing, with more than $45 billion under management, has a publicly traded subsidiary, New York-based Macquarie Infrastructure Company Trust (MIC), which owns, operates and invests in infrastructure businesses.

The company’s stock, which closed May 16 at $44, had gained 25.8% since the start of the year.

Infrastructure investing, a type of privatization, increasingly is showing up in the United States in the form of long-term lease agreements between state and local governments, and privately funded multibillion-dollar investment pools.

As the market continues to evolve, retail investors could become a significant part of the equation. “Once the volume gets large enough, conceivably, retail investors could purchase shares of funds — and I fully expect it to get large enough,” said Steve Steckler, chairman of Infrastructure Management Group Inc., a financial and management consulting firm in Bethesda, Md.

Industry consultants estimate that as much as $1 trillion worth of private funds could be invested over the next decade in public leases for toll roads, parking garages, airports and other infrastructure elements.

The investment pools typically are structured by investment banks as private-equity partnerships, and the actual size of the market is difficult to measure, according to industry sources.

According to published reports, industry analysts predict that a total of more than $100 billion worth of public property could be leased this year and next. This compares with approximately $7 billion worth of investments over the previous two years.

This type of infrastructure investing has been developing for nearly two decades in Australia, Canada and parts of Europe.

In the United States, the watershed event came in 2005 when the city of Chicago handed over management of the 7.8-mile Chicago Skyway Bridge through a $1.8 billion, 99-year lease agreement.

Last year, the state of Indiana trumped the Chicago deal by signing a 75-year lease, worth $3.8 billion, for the 157-mile Indiana East-West Toll Road.

Both deals were struck jointly with Macquarie Infrastructure Management and Cintra Concesiones de Infraestructuras de Transporte SA of Madrid, Spain.

At this point, virtually any revenue-generating public infrastructure is up for consideration, as municipalities identify the potential to fill budget gaps by letting the private sector take over management.

In early December, Pennsylvania Gov. Edward Rendell requested “expressions of interest” from investors willing to lease the 537-mile Pennsylvania Turnpike.

Within weeks of announcement, the governor’s office had a stack of 48 responses from potential investors, according to spokesman Rich Kirkpatrick.

“It was just an informal request,” he said. “It appears the market is ready for this.”

According to Mr. Kirkpatrick, the state needs to fill a $965 million shortfall in a $5 billion transportation budget. With lease agreement estimates of $8 billion to $12 billion, he said, the economics are difficult to ignore.

Golden opportunity

For private-equity investors, the economics add up, because the ability to increase revenue through toll hikes represent a long-term and predictable income stream hovering around 12% — which is particularly appealing to pension funds and endowments that are managed for long-term obligations.

So far, most of the infrastructure lease deals have focused on established revenue-generating public enterprises. But the state of Texas is already taking it to the next level by working with private investors to construct a network of toll roads, the management of which will be leased out.

The sudden popularity of infrastructure leases is also spawning a philosophical debate regarding the ability of local governments to do what the private sector is so eager to take on. “I support the idea, but there has to be value-added,” said Mr. Steckler, whose firm advises a number of government entities, including the state of Texas.

“A value-added lease would be developing something new or improving an existing infrastructure,” he added. “But taking advantage of a geographic monopoly is value extraction.”

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