Almost four years ago, on 2 August 2012, we wrote an editorial 'crowning' Global Infrastructure Partners (GIP) as the king of the infrastructure jungle. At the time, GIP had just raised $7.5 billion for its second infrastructure fund and, even though it hadn't yet closed it (that would come in the fall, at $8.25 billion), it had already raised more money for a single fund than any of its peers.
This week, Toronto-based asset manager Brookfield takes the crown from GIP – if maybe only briefly – with its record $14 billion fundraise for its third infrastructure fund. We say briefly because if GIP, which has already raised at least $10.8 billion for its third infrastructure fund, also hits its hard-cap, it will raise $15 billion, taking back its title by a slim margin. As we've often written this year, once GIP does close its third fund, the New-York fund manager and Brookfield will have raised a staggering $29 billion between them.
There are many eye-catching features about Brookfield's third fundraise – from the $4 billion committed by Brookfield itself, to the $6.2 billion raised from 77 new investors (out of a total of 120). But if we had to pick a stand out, it would be this: of the $27 billion raised by Brookfield across real estate, private equity and infrastructure over the last 18 months, infrastructure accounted for over half of that total. That includes oversubscribed fundraises for Brookfield Strategic Real Estate Partners II ($9 billion) and private equity vehicle Brookfield Capital Partners IV ($4 billion).
When asked what this record fundraise meant for Brookfield as a business, infrastructure head Sam Pollock argued that infrastructure could one day be as big as real estate. Brookfield has $240 billion of assets under management, with $146 billion comprising real estate. If that's the way infrastructure is headed – and Pollock was confident there is more growth to come – then that is very good news indeed.
The Canadian asset manager is not the only shop where infrastructure is in the ascendancy, though, with global asset manager BlackRock offering another good example. Earlier this year, BlackRock head of infrastructure Jim Barry was promoted to lead the firm's new real assets unit, which combined its real estate and infrastructure businesses.
At the time of his promotion, BlackRock emphasised his experience as a builder of businesses, citing Barry's 11-year tenure as chief executive of renewables developer NTR. That aside, ask yourself if Barry would've really been promoted if infrastructure, which only accounts for $8.6 billion of the new unit's $29 billion AUM, was not viewed internally as an asset class that's going places.
So is the rise of mega-funds like Brookfield's and GIP's just an expression of infrastructure's growing mainstream status? Yes, but that only tells half the story. The other half is that investors in Brookfield and GIP's vehicles gain access to the only two funds out there capable of writing multi-billion dollar equity cheques.
Brookfield's recent Isagen acquisition totalled close to $3 billion in equity – and produces about 16 percent of Colombia's power – and it's now in exclusive talks with Brazil's Petrobras to acquire its natural gas transmission assets in a deal that could be worth some $5 billion in equity. Being able to play at that level unlocks a different type of asset.
And that's the real prize for other managers reading this. With record amounts of capital flowing into infrastructure, who will be able to join Brookfield and GIP in this rarefied stratosphere? For the time being though, and at least until GIP closes its latest fund, it's time to proclaim: all hail the king!
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