First State nears €700m for European fund

The Australian-headquartered fund manager has collected more than €305m in moving from the second to third close of its European Diversified Infrastructure Fund. The fund is aiming to raise €1.5bn in total.

First State Investments (First State) has so far raised €673 million for its European Diversified Infrastructure Fund, according to a statement from the firm. The third fundraising period collected more than €305 million from European institutional investors including pension funds and insurance companies.

Sources previously told Infrastructure Investor that the fund had reached almost €600 million in July last year, having held a first close on €183 million in August 2009 and a second close on €366 million in June 2010.

The fund has been in the market since 2007 and has a target size of €1.5 billion. 

Having started out as an open-ended vehicle – with no defined term and with the capacity to add investors throughout its life – the fund was changed to a hybrid structure early in 2011. The structure is based on a 15-year life, with investors given the opportunity to extend the life in five-year blocks.

The fund targets mature, income-generating assets in the utilities, transport and essential services sectors in European OECD (Organisation for Economic Cooperation and Development) countries. The fund’s assets are expected to deliver internal rates of return of 10 to 15 percent and stable, predictable cash yields of 5 to 7 percent per annum.

First State says it has so far invested €301 million from the fund in three assets: Anglian Water, the UK’s fourth-largest water and sewerage service provider; Electricity North West, the UK’s sixth-largest electricity distribution network; and Reganosa, a Spanish liquefied natural gas regasification plant and gas transmission network.

According to the statement, since inception at first close in August 2009, the fund has delivered total returns – post fees and expenses – of more than 33 percent, including cash returns of over 12 percent (as at 30 September 2011).

“The successful conclusion of our latest round of fundraising gives us sufficient capacity to succesfully execute the next couple of investments,” says Philippe Taillardat, First State’s co-head of infrastructure investment, in the statement. “We are ideally positioned to exploit the investment opportunities arising from governments which are increasingly under pressure to free up capital, mandated regulated divestitures and the continued strategic repositioning by corporates.”     

First State’s European team has 13 infrastructure investment professionals, supported by 16 infrastructure professionals based in  Sydney.