Dutch asset manager APG has warned that the potential for infrastructure returns has come under pressure as the number of large global players in the industry increases.

Speaking with Dutch financial daily Het Financieele Dagblad (FD), Gert Dijkstra, strategy and communications chief at the €424bn APG, said the scramble for infrastructure projects had become “increasing aggressive” and that the asset manager had had to withdraw from the bidding process on several occasions because the investment no longer matched its risk/return target.

Dijkstra said the target of doubling the €8bn infrastructure allocation at APG’s largest client, the €373bn civil service scheme ABP, over the next three years was therefore a “challenge”.

As examples of increased competition, he cited large players from Asia, including sovereign wealth funds, which have shifted focus from equities and bonds to infrastructure and private equity.

“They can bid competitively, as their capital costs are lower,” the FD quoted Dijkstra as saying.

And because the number of available infrastructure projects has failed to keep pace with committed assets, yields were coming under pressure, according to Wim Blaasse, managing parter at the Dutch Infrastructure Fund, which has invested €2bn in the asset class for pension funds and insurers.

Infrastructure has been part of APG and PGGM’s investment universe since 2004, when both started investing in roads and hospitals, predominantly in the UK and Australia.

Since then, the accent has shifted to public/private partnerships, under which governments often outsource maintenance and financing in contracts for periods of up to 30 years.

Until now, the returns of infrastructure projects have been relatively high – 11-12% for investments that include the start of the construction phase, and 8-9% for later-stage participations.

At present, APG has invested approximately 2% of its assets in infrastructure, while the €189bn asset manager PGGM has a 2.6% stake in the asset class.

According to Preqin’s most recent quarterly update on infrastructure, as of September 2014, uncalled capital commitments, or ‘dry powder’, stood at an all-time high of €89bn, showing the considerable capital reserves fund managers have available.

However, the number of deals being completed has declined for consecutive quarters due to concerns over asset pricing, and many European pension funds are finding it harder to identify attractive opportunities.