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‘Even for a $15bn fund, there are deals too large to do by yourself’

Speaking on the first day of our Global Summit in Berlin, chairman Adebayo Ogunlesi argued GIP has the firepower to command the attention of the world’s largest companies but said it would continue to co-invest alongside LPs to access the heftiest assets.

Adebayo Ogunlesi, chairman, managing partner and founder of Global Infrastructure Partners, thinks the $15.8 billion vehicle the firm closed in December last year targets a market that is showing no sign of drying up.

Speaking on the first day of Infrastructure Investor 's Global Summit in Berlin today, he acknowledged that “there will be periods when infrastructure assets are fully priced”, but argued that “the opportunity in the sector is tremendous”, citing a projected infrastructure deficit totalling $3 trillion in the US alone over the next 10-15 years.

In that context, he noted GIP III, which had an initial hard-cap of $15 billion, does not have a size? limit for the equity cheques it is willing to invest in assets. The firepower that gives the firm allows it to command the attention of large energy and transport groups, thereby opening up a field of fresh opportunities. “Size is an advantage,” he argued.

He admitted that pushing the fund to its eventual $15.8 billion size had required GIP to convince investors that a “slight increase” was warranted, observing that the firm could have raised more – “not $20 billion but perhaps $16, $17 or $18 billion”.

Ogunlesi did not think the rise of direct investors was a threat to the industry's largest funds, arguing instead that it opened up potential avenues for collaboration. “Even for a $15 billion fund, there are deals too large to do by yourself,” he observed, adding that GIP would continue to partner with the likes of large sovereign or pension funds to access such transactions. 

He sounded optimistic about the resilience of infrastructure in the face of changing macroeconomic conditions. Even if the US Fed raises interest rates three or four times, he said, “we won't get to an environment with rates at 5-6 percent, probably more like 2-3 percent”. He did not expect it to make a “huge difference in terms of performance and valuations of infrastructure assets”. Rising rates, he noted, “is a sign that the economy is doing better”.

Neither was he worried about a backlash against foreign investment in infrastructure. Out of the 27 assets bought by GIP so far, Ogunlesi explained, only three were purchased from governments. “We're not terribly beholden to public assets.”

“In the US, we often hear that the reason we should not privatise is because infrastructure assets are 'strategic',” he remarked. But in the country, the really strategic assets, such as energy and telecoms infrastructure, are all in private hands, he said. “If GIC buys a toll road in Pennsylvania, what are they going to do with it?” He asked. “The whole idea sounds silly”.