Brookfield’s new $10bn fund neck-and-neck with GIP’s

In what is set to be one of the biggest fundraisings of next year, Brookfield Asset Management (BAM) has begun tapping the market for its third infrastructure vehicle, which has a target of $10 billion and a hard cap of $12 billion, market sources confirmed to Infrastructure Investor.

The fundraising comes two years after the Canadian alternative investment firm raised the asset class’s second-largest fund, at $7 billion. It places its third vehicle neck-and-neck with GIP’s third fund, which is targeting a $12 billion final close with a $15 billion hard-cap. If both funds hit their hard-caps, they will raise a combined $27 billion, or just over half of the $51 billion raised by unlisted infrastructure fund managers last year, according to Infrastructure Investor Research & Analytics.

While the Toronto-based firm has not yet released a public placement memorandum (PPM) – the legal document informing potential investors of the risks, strategy and terms of investment of a product – it has begun unofficially marketing Brookfield Infrastructure Fund III (BIF III), as is evident by the Chicago Teachers’ Pension Fund’s (CTPF) recent decision to approve a $50 million allocation to BIF III. According to Infrastructure Investor Research & Analytics, CTPF is a first-time investor with Brookfield.

The $11.2 billion public pension fund has a target allocation of 3 percent to infrastructure. As of September 30, 2015, the actual allocation stood at 2.33 percent of the fund, according to CTPF director of investments Angela Miller-May.

“The under-allocation was a driving factor in completing an infrastructure RFP,” Miller-May said in an e-mailed response. “While we received several responses that detailed very sound global infrastructure strategies, we found Brookfield’s diversification and operating presence across various sectors and geographies as well as Brookfield’s ability to identify and create value in complex situations to be an attractive fit for our current infrastructure portfolio,” she added.

Whether the new fund will follow the same strategy as its predecessor is unclear, but according to materials presented during an October 8 investor event, Brookfield is looking to further diversify its geographic footprint in markets such as Asia, while also increasing North American exposure to between 30 and 40 percent. Brazil remains in focus, constituting “a once-in-a-lifetime opportunity for us to invest in,” Brookfield Infrastructure chief executive Sam Pollock told investors during the October event.

From a sectoral perspective, the Canadian fund manager is interested in expanding in segments such as airports and water.

Brookfield Infrastructure Fund II, which beat its original $5 billion target to close on $7 billion in October 2013, focused on transportation, renewable power and energy in North and South America, Asia-Pacific and Europe.

Limited partners investing in BIF II included the British Columbia Investment Management Corporation, the New Mexico State Investment Council, the Teacher Retirement System of Texas, the Maine Public Employees Retirement System and the New York City Retirement System.

BIF II is the second-largest infrastructure fund ever raised worldwide, coming in behind New York-based Global Infrastructure Partners’ (GIP) GIP II, which closed on $8.25 billion in October 2012. Listed on the New York and Toronto stock exchanges, BIP owns and operates utilities, transport, and energy assets worldwide.