InstarAGF beats Fund II target with $1.2bn close

The Toronto-based firm has already deployed 35% of its latest vehicle in three assets in the midstream and aviation sectors.

InstarAGF Asset Management has reached final close on its sophomore fund, raising a total of $1.2 billion – $200 million above its original target.

The Toronto-based fund manager received strong support from its existing LPs, achieving an 80 percent re-up rate, while it also attracted new investors from Canada, the US, Europe, the Middle East and Asia.

The current pandemic-related crisis did not seem to affect InstarAGF’s fundraising efforts, since it exceeded its original $1 billion target as expected.

“We were well advanced in our remaining processes and nearing the completion of our fundraise when covid-19 emerged,” the firm’s president and chief executive Gregory Smith told Infrastructure Investor.

According to a press release, InstarAGF Essential Infrastructure Fund II will invest in “high-quality civil, utilities and energy infrastructure assets that exhibit sustainable downside protection”.

The fund has already deployed approximately 35 percent of its capital in three assets. These are Oilfield Water Logistics, a midstream water infrastructure business based in Dallas; Leading Edge Jet Center, the sole provider of business aviation and jet fuelling services in Central Oregon; and Steel Reef, a midstream services company with operations in Canada and the US.

Asked whether the significant drop in oil prices and demand is a concern, Smith replied: “We focus exclusively on the most economic, active basins in North America and on businesses that have strong downside protection and offer a distinctive value proposition for E&P companies, such as the capturing and processing of flared gas, or managing produced water, both of which are value-added services that help improve the environmental footprint of the sector overall and are required by regulation.”

Like its predecessor, fund II will pursue a mid-market North America-focused strategy. The firm is seeking deals between $100 million and $1 billion in enterprise value and aiming for net returns between 10 and 14 percent.

InstarAGF’s first fund closed on C$740 million ($552 million; €485 million) in June 2017. The firm’s portfolio includes Canadian district heating network Creative Energy; Florida-based port logistics processing company AMPORTS; and Okanagan Wind, two wind farms with a combined generating capacity of 30MW located in British Columbia’s Okanagan region.

The firm had also invested, in January 2015, in the passenger terminal at Billy Bishop Toronto City Airport as part of a consortium comprising Partners Group, JP Morgan Asset Management and Kilmer Van Nostrand, a private investment holding company of Toronto businessman Larry Tanenbaum. InstarAGF sold its stake to JP Morgan in February 2019.