First State nears €500m for European infra fund

The firm is looking to hold a third close soon on the fund, which recently restructured to a ‘hybrid’ vehicle with a finite life that can be extended in five-year blocks.

First State Investments is eyeing a third close on its European Diversified Infrastructure Fund on €500 million, according to a person familiar with the firm. The fund, which has been in the market since 2007, previously held a first close on €183 million in August 2009 and a second close in June 2010 on another €183 million, taking its committed capital to €366 million.

Those closes were held while the fund was structured as an open-ended investment vehicle, meaning that the fund had no defined term and has the capacity to add on additional investors throughout its life. The third close, targeted by the end of June, will take place under a “hybrid” structure that First State created for the fund earlier this year, whereby the vehicle will start with a 15-year life and give investors the opportunity to extend its life in five-year blocks.

Retooling fund structures has in the past proven helpful to some managers in the European market. Cube Infrastructure, the €1.1 billion Natixis-backed infrastructure fund, originally started off as an open-ended fund vehicle and found greater traction in the market once it restructured to a closed-ended fund with a 12-year life, an executive at the firm previously told Infrastructure Investor.

Other fund managers have found success with open-ended structures, particularly in Australia, where the infrastructure asset class is well-established. Industry Funds Management, the Australian asset manager, has championed open-ended funds for its infrastructure platform, which had $7 billion of capital committed as of last year. First State also manages an open-ended unlisted fund in Australia, the A$546 million (€410 million; $589 million) Global Diversified Infrastructure Fund, which owns a portfolio of Australian airports and UK utilities.

First State launched its European Diversified Infrastructure Fund in 2007, when it hired former RREEF director Danny Latham to lead the effort. The fund focuses on economic infrastructure within Europe, such as utilities and transportation, and led the 2007 acquisition of United Utilities Electricity Limited, a regulated electricity distribution network in northwestern England, for £1.64 billion, according to its website.

The firm is part of Colonial First State Global Asset Management, the asset management arm of Australia’s Commonwealth Bank, which had $155.4 billion of assets under management as of the end of last year.