New York-based Apollo Global Management has closed its second dedicated infrastructure fund on $2.54 billion after about 18 months on the road.
Dylan Foo, who joined Apollo as co-head of infrastructure from AMP Capital in September 2019, told Infrastructure Investor that the fund was targeting $2 billion-3 billion, adding that a $3.5 billion figure noted on an SEC filing in July 2020 for Apollo Infrastructure Opportunities Fund II represented the hard-cap.
Nearly $400 million of the fund’s capital has been committed to date, with the vehicle targeting mid-market infrastructure assets primarily across the communications, power and renewables and transportation verticals.
Existing projects include Broad Reach Power, an energy storage and renewable energy platform; the Ionic Blue joint venture with Johnson Controls, which provides sustainability and energy efficiency services; Great Bay Renewables; US Wind, a Maryland-based offshore wind platform; fibre carrier FirstDigital Telecom; and Parallel Infrastructure, a telecommunications platform with a portfolio of approximately 500 macro cell towers.
Rather than deploying via the traditional route of all equity investments, the fund has used other methods of capital deployment such as preferred and convertible equity in some of its deals.
“Apollo as a firm has a reputation in the market investing private equity across the board as being relatively flexible in our mandates,” Foo explained. “We think that flexibility is a really good thing for infrastructure because the return profiles for some of these assets can be very aggressive. [In] applying an equity-control-only strategy, you’re limiting your universe and you’re limiting your flexibility. I think for us, flexibility, creativity and the ability to do more complex structuring is done for one reason, which is to protect the downside, which is what infrastructure is all about.”
In an investing landscape increasingly dominated by mega-funds amassing tens of billions of dollars in capital, Foo was bullish on Apollo’s positioning as a mid-market fund.
“The top guys are getting bigger and it will be interesting to see how it plays out, as they all started where we are today in the mid-market,” he said. “We think there’s a gap now for a platform like ours, with global reach, so we designed our strategy around this mid-market space. We just think there’s more value in mid-market. Is there a place for it? The answer is: yes, absolutely. There’s a place for large cap, too. But we just think the best risk adjustments are mid-market right now.”