Brakes applied to infrastructure fundraising

With fears mounting over the weakening global economy, investors kept their wallets closed in Q3 2011. Just $2.8bn was raised in the quarter, meaning that the global fundraising total this year is likely to be less than in 2010.

With one quarter still to go, it looks as if 2011 will be the year when the infrastructure fundraising ‘recovery’ stalled.

After a promising second quarter, a lowly $2.8 billion was raised in the third quarter, according to the latest figures from placement agent Probitas Partners. This means the 2011 fundraising total has already surpassed the nadir of 2009, but is highly unlikely to reach last year’s total.

The figures reveal that, by the end of the third quarter of this year, infrastructure funds globally had closed on $11.2 billion of fresh capital. This beats the $10.7 billion closed in full-year 2009, in the wake of the global financial and economic collapse, but is probably too far adrift of the $19.0 billion raised last year to close the gap in the final quarter.

Hopes had been high that this year would continue the recovery hinted at last year, and the $6.2 billion raised in the second quarter offered optimism. However, investor confidence damaged by the original crisis has been further eroded by continuing economic fragility.

“There are a number of issues that investors are dealing with that are holding them back,” Probitas partner Kelly Deponte told Infrastructure Investor in July. “A number of them are still dealing with impacts to their portfolios of the financial crisis, and though the rebound from market bottoms in the spring of 2009 has certainly helped many, concerns over renewed economic weakness in the US and Europe that have developed over the last few months are giving certain investors pause.”

The third-quarter figure would have been notably lower had it not been for the near-$1.2 billion final close of Brazilian fund manager Pátria Investimentos’ second infrastructure fund in August – the largest infrastructure fund closing of the year so far. The second-largest capital raising was by US manager ArcLight Capital Partners for its fifth fund, which is targeting a final close on $2 billion and had reached almost $1.5 billion by August. These were the only two funds that closed more than $500 million during the quarter.

Nearly 80 percent of funds raised in the third quarter was for investment in the developed markets of North America or Europe (or global funds with heavy allocations to these markets). This compares with an equivalent figure of just under 90 percent in the second quarter.

With the fundraising market remaining muted, pressure grows on those seeking capital. According to Probitas, 100 funds either in the market or coming to market are seeking a total of more than $95 billion. At the end of last year, $75 billion was being sought.