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Ancala closes £400m mid-market fund, eyes Euro vehicle

The UK firm, which held a £160m first close on the fund 11 months ago, is now preparing for the launch of a similar-sized Europe-focused offering.

Ancala Partners has closed its UK Mid-Market Infrastructure Platform after hitting the upper end of its £300 million ($367.9 million; €345.5 million) to £400 million target range.

The fund, focused on the UK mid-market, closed after securing capital predominantly from UK-based pension funds.

According to the Berkshire Pension Fund, which last year agreed to invest £50 million in the vehicle, Ancala’s fund is targeting an IRR of 9 percent with returns to be fully delivered by 2024.

“The returns achievable by investing in mid-sized infrastructure projects are greater than those achieved from larger projects where more capital for investment is available driving down expected returns,” the Berkshire fund said in its assessment of the vehicle. The pension fund opted in to what Ancala described as the fund’s “innovative structure”, allowing it to review investments and choose which to take part in and when to sell its investments.

Ancala partner Vincent Gerritsen told Infrastructure Investor that the strategy “makes sense in the current market” with the wealth of larger infrastructure funds on offer.

The Mid-Market Infrastructure Platform has made several investments over the past year, acquiring a 100MW solar portfolio from Anesco, hydropower developer Green Highland Renewables and the SAGE and Beryl gas pipelines. Gerritsen said the fund would continue to invest across the telecoms, utilities and energy sectors and while he did not rule out PPPs, he explained this would be harder due to diminishing expected returns offered by such assets.

A similar strategy will be pursued in a Europe-focused fund which Ancala said it will begin marketing this year. While the fund’s actual launch is not expected in the short-term, Gerritsen noted it will target a similar size to the UK-focused vehicle.

Ancala is also embroiled in a bidding war with Severn Trent to buy UK water company Dee Valley. The firm’s £71.3 million deal was agreed in October last year before Dee Valley later accepted a £78.5 million offer from Severn Trent.

A court hearing is scheduled for next week following concerns a transfer of 445 shares distorted the decision at the time. Ancala says there is “significant uncertainty regarding the deliverability” of Severn Trent’s offer and says its bid “provides the best outcome for the company”.