GIP smashes records with $22bn Fund IV final close – exclusive

The New York-based firm collected commitments from 240 global LPs, a strong sign that 'investors like the asset class, like the opportunity set,' GIP’s chairman said.

At $22 billion, Global Infrastructure Partners has held final close on its fourth flagship fund, making it the largest infrastructure fund ever raised.

Commitments from 240 institutional investors helped GIP IV become one of the largest investment vehicles of any asset class to reach final close this year. With economic uncertainty rising, the sky-high fundraising total reflects strong interest in less risky infrastructure, even though some in the industry fear an over-competitive market may drive down returns.

“What the fundraise says is there is interest in the asset class,” Adebayo Ogunlesi, GIP chairman and managing partner, told Infrastructure Investor. “That’s why so many fund managers have increased the size of their funds. Investors like the asset class, they like the opportunity set.”

The validity of that statement is underscored by Brookfield Asset Management, GIP’s Toronto-based rival that is also expected to close its fourth flagship fund on around $20 billion.

Ogunlesi said LPs that committed to GIP IV come from “every geography”, adding that around 30 percent of investors are new to the firm while 70 percent were re-up commitments from investors in previous GIP funds. New investors are “not materially different” in what they want out of infrastructure investments, which is long-term steady returns, Ogunlesi said.

Asked whether Fund IV’s larger size changes GIP’s investment strategy, Ogunlesi replied with an unequivocal “no”.

Known LP commitments to GIP IV, according to Infrastructure Investor data, include the Alaska Permanent Fund Corporation ($500 million), the Oregon State Treasury ($400 million), the Florida State Board of Administration ($225 million) and the Connecticut Retirement Plans and Trust Funds ($200 million).

“It always feels good when investors place confidence in you by entrusting you with significant amounts of capital to manage,” Ogunlesi said. “That is a good feeling, but with that comes a lot of responsibility”

GIP began fundraising in January, and by May had collected $13.5 billion for a strategy that will seek majority or control positions in energy, transportation, water and waste management assets primarily in OECD markets. Up to 15 percent can be invested in “select” non-OECD countries, according to GIP marketing documents given to an institutional investor and seen by Infrastructure Investor.

GIP is targeting gross returns of 15-20 percent. Plans are to make 10-15 investments, with equity ticket sizes ranging from $1 billion to $2.5 billion, according to the documents. The firm is charging management fees on a sliding scale, ranging from 1.75 percent for commitments up to $75 million, to 1 percent for amounts greater than $225 million. Other fund terms are similar to previous GIP vehicles: 20 percent carried interest, 8 percent preferred return, a five-year investment period and a 10-year total duration, with two possible one-year extensions at the firm’s discretion.

GIP, which Ogunlesi, a former Credit Suisse Group executive, launched in 2006, closed its third flagship fund in 2017 on $15.8 billion. The firm is also understood to be in the early stages of raising a $5 billion emerging markets-focused vehicle.