Barings closes first-ever dedicated infra debt fund on $630m

The firm has historically invested over $18bn in the infrastructure space out of separate accounts, but surpassed its $500m target in its first attempt at a dedicated vehicle.

Ten years after starting its infrastructure platform, Barings has stepped into the fundraising game with the close of the asset manager’s Target Yield Infrastructure Debt Fund, its first fund in the infrastructure debt space.

The fund closed on $630 million, $130 million above its target of $500 million. According to Pieter Welman, Barings’ head of global infrastructure, it will target returns of around 6 to 7 percent and consist of a mix of junior and senior debt. It will also be focused on North America and Europe, investing only in OECD countries.

Welman also divulged to Infrastructure Investor that the fund will seek below investment-grade assets, lying somewhere between core and core-plus status. Themes of said investments “will be a mix, with the heaviest focus on renewables and associated businesses along with digital infrastructure and transportation”, according to Welman.

He continued: “We’re deliberately sticking to the strategy we’ve had for the past 10 years in terms of investing. We’ve done below investment-grade infrastructure deals for a long time now, but now we’ve got a dedicated structure for it in the form of this fund.”

The iron is hot

Indeed, Barings’ global infrastructure platform currently has over $14 billion in assets under management, with $3.4 billion having been deployed in the past year-and-a-half. Yet, 10 years after establishing its dedicated infrastructure debt platform and two years after closing its first real assets fund and investing $18 billion dollars across 300 transactions, the Target Yield Infrastructure Debt Fund was established. So why now?

“There are two reasons,” Welman explained. “First, many LPs are looking to make fund investments. It just seems to be the way our clients want to invest, and it also seems to be the most efficient way for many investors to access this portion of the market. Second, launching this fund enabled us to accommodate a broader investor set than our platform has supported in the past.”

According to Welman, Barings’ traditional LP base of large insurance groups and pension funds had approached the fund manager asking it to launch a fund and boost its infrastructure strategy. Barings managed to get new players on board as well.

All the third parties in the fund are new investors to the infrastructure platform, Welman explained, while about half of the clients in the fund are new to Barings overall. He added: “There will definitely be an acceleration of our infrastructure programme, which stems from demand from clients for environmentally-friendly strategies.”

Indeed, 2022 was the first year Barings made it into Infrastructure Investor’s top 10 infrastructure credit GPs, despite not appearing on the top 30 list in 2020 and 2021. Given the firm’s success in the space and with its first fundraise, it’s keen to move forward. A market source told Infrastructure Investor that Barings expects to have two-thirds of the fund invested by the end of this quarter, which could lead to a successor fund in the next six to 12 months, although Barings declined to comment on such future moves.