BlackRock has completed an initial close for its latest renewable power fund, Renewable Income Europe, with EUR275 million in commitments secured from a range of institutional investors from Europe and Asia.
Renewable power generation has been a leading source of investment flow within infrastructure over the last five years. BlackRock expects this trend to continue, increasing the need for capital to finance a rapidly evolving power generation sector.
Rory O’Connor, Head of European Investment for BlackRock Renewables and manager of the fund, says: “Renewable energy has become a mainstream asset class within infrastructure. Demand for renewables in developed countries is being driven by the need to replace an ageing power generation fleet, improvements in cost competiveness and concerns about climate change. For investors, the sector can provide opportunities for less correlated, inflation-linked, long-duration income and attractive risk-adjusted returns.”
Renewable Income Europe has a 20-year buy-and-hold strategy deploying capital in European renewable projects providing long-term inflation-linked income to investors. Investments are made on an unlevered basis and focus on projects across wind and solar photovoltaic systems (PV). The fund’s investment team looks for opportunities on a pan-European basis and sees the majority of opportunities for this fund coming from Western Europe.
BlackRock’s Infrastructure business has $8.3 billion USD in invested and committed capital, and currently owns and manages 66 wind and solar projects in Europe and North America on behalf of its clients. Since 2011, the firm has raised over $2 billion USD in equity capital focused on investment in renewable power projects, via funds and associated co-investment programmes, and the Renewable Income Europe is its fourth Renewable Power fund to hold a close.
European investors show bullishness towards certain alternative asset classes, with 60% intending to increase exposure to real assets, according to a December 2015 survey of BlackRock’s institutional clients.
Many institutions worldwide are struggling to generate sufficient returns to meet liabilities, and the results of the poll of 174 of BlackRock’s largest clients, representing $6.6 trillion USD, signal a shift away from traditional asset classes and passive investments that have been at the core of many portfolios.
Peter Nielsen, head of the Continental European Institutional business at BlackRock, says: “In a volatile market environment with consistently low yields institutional investors globally are struggling to generate sufficient returns to meet their liabilities. Real asset investments like renewable power are ideally suited to institutions that have a long-time horizon, and are looking income-producing assets with inflation-protection and low correlations.”
