Public pension funds have been passive investors in U.S. infrastructure projects for years, serving primarily as limited partners in designated infrastructure funds. However, the continued maturation of U.S. public-private partnerships, combined with pension funds' need for yield to match future liabilities, has prompted the funds to take a more active role in infrastructure investment. In recent years, many pension funds have built internal teams to make direct (as opposed to indirect and for the most part passive) investments in infrastructure projects.

Governments in particular should pay close attention to the emergence of pension funds as direct infrastructure investors. With OECD pension assets totaling $10.6 trillion at the end of 2010, the world's pension funds offer governments a strong value proposition. Given the fixed nature of their pension liabilities, pension funds emphasize yield and long-term appreciation, and are likely to accept rate of returns in the neighborhood of CPI + 5%. Infrastructure investments, which generate highly stable cashflow and enjoy high barriers to entry, are ideally suited to meet these criteria.

Also of particular significance to governments, pension funds have two bottom lines. First is expected yield and returns; second is their desire to invest in projects that meet a mission of social responsibility. Pension investors prefer, when possible, to invest in projects that promote government objectives such as reduced congestion and clean air. Taking account of pension funds' double mission can help governments capture opportunities to develop infrastructure through meaningful partnerships with like-minded investors.