GIP lifts hard cap to more than $8bn after vote

Global Infrastructure Partners (GIP), which was originally targeting at least $5 billion for its second fund, has won approval from existing backers of the fund to raise the hard cap from $7.5 billion to more than $8 billion, according to market sources. GIP has not commented on the fundraising.

The GIP II fund is expected to announce a final close shortly on the full amount being targeted. The New York-based fund manager announced a second close of the fund on $5.5 billion in May, already taking it past its original target.

The fund wil become the largest infrastructure fund ever raised, surpassing the $6.5 billion collected by Goldman Sachs Infrastructure Partners’ first fund in 2006, according to a survey produced recently by placement agent Probitas Partners. 

Demand for the fund has been strong in recent months from both a small group of big-ticket investors and a large number of smaller investors. If the fund does indeed reach its hard cap – or at least close it – it would represent an extraordinary achievement in a very difficult fundraising environment. Probitas noted that just $2.9 billion was raised globally by infrastructure funds in the first quarter of this year.

It would also represent a vindication of GIP’s decision to bring fundraising in-house following the appointment of Susan Healy – a former senior executive at Babcock & Brown and head of investor relations at Carlyle Group – as head of investor relations in 2010. The firm’s first fund, which closed on $5.64 billion in May 2008, was advised by the placement arm of Credit Suisse.

The decision to raise hard caps can be a controversial one as it can mean scaling back the commitments of those who have already put money on the table. In this case, market sources say the vote went in favour of GIP because investors were attracted to the idea of one fund having genuine firepower in a market where potential rivals are capital-constrained.

In April, GIP II wrote its first equity cheque when it acquired the UK’s Edinburgh Airport for £807 million (€990 million; $1.3 billion) – its third UK airport investment after Gatwick and London City. It followed this up with a $4 billion deal to buy pipeline assets from US oil and natural gas producer Chesapeake Energy Corp earlier this month.