The recent launch of Blackstone Infrastructure I demonstrates the long-term trend towards capital concentration in the unlisted infrastructure market, says Preqin, with investors looking to commit more capital to fewer fund managers.
This means that while fundraising as a whole is at record levels, the majority of it is secured by a small coterie of firms.
Funds closing with USD1.5 billion or more in investor commitments have accounted for three-quarters of the total capital raised in 2016 and 2017 so far – mega funds alone account for half of 2017 YTD fundraising.
Furthermore, the record for the largest- ever infrastructure fund has been broken twice in the past 12 months, by Brookfield Infrastructure Fund III in July 2016 and Global Infrastructure Partners III in January 2017.
Blackstone Infrastructure I is targeting USD40 billion for global infrastructure investments, more than twice as much as any previous vehicle. The anchor commitment of USD20 billion from Saudi Arabia’s Public Investment Fund is the largest single contribution of any investor to an infrastructure fund.
Large and mega unlisted infrastructure funds closed in 2016 secured USD47 billion collectively, 74 per cent of the global annual total. Four funds have closed on more than USD1.5 billion in 2017 YTD, securing USD25 billion – 76 per cent of the industry total.
By contrast, large and mega funds accounted for 56 per cent of fundraising in 2015, and just 35 per cent in 2012 and 2011.
The three largest unlisted infrastructure funds currently in market are targeting a combined USD50 billion, 34 per cent of the total capital sought for the industry, and more than twice the amount targeted by small funds.
Preqin tracks 86 large or mega unlisted infrastructure funds that have closed historically. Collectively, these vehicles have raised USD279 billion from investors.
Macquarie Infrastructure and Real Assets has raised nine large or mega infrastructure funds, the largest number, while ArcLight Capital Partners has closed five.
Tom Carr (pictured), head of real assets products, says: “The unlisted infrastructure market is seeing an unprecedented boom in fundraising, with record annual fundraising seen in 2016, and 2017 on course to set a new record. This is being driven in large part by the closure of mega funds such as Global Infrastructure Partners III and the forthcoming Blackstone Infrastructure I. Investors are tending to commit more capital to fewer managers, so mega funds represent a greater proportion of overall fundraising activity. Investors may be attracted to the ability of the largest fund managers to procure attractive deal opportunities, as well as their proven track record in the asset class.
“Infrastructure investments appeal to investors due to their ability to offer strong risk-adjusted returns, downside protection, and low correlation to other asset classes. The long-term nature of infrastructure projects aligns them with the investment objectives and horizons of large public-owned institutions such as sovereign wealth funds and public pension funds, while the scale of many modern infrastructure projects allows investors to deploy significant amounts of capital, as evidenced by PIF’s record contribution.”
