Macquarie nears Series 1 close for long-life ‘Super Core’ fund

Macquarie Infrastructure and Real Assets’ Super Core Infrastructure Fund is set to reach an imminent close of up to €2.5 billion, according to public pension documents and sources consulted by Infrastructure Investor.

The Series 1 close – the first of three planned fundraisings – is set to come after the $31 billion South Carolina Retirement System committed €125 million to the vehicle. The latter is targeting an annual 7 percent to 8 percent net return with a 5 percent cash yield. It is unclear how big Series 2 and 3 will be.

The fund is structured as a 20-year fund starting from the close of Series 1 and can be extended in five-year increments into perpetuity, provided a majority of LPs agree on it. A structured secondaries programme is available every five years from and including year 10.

The fund’s performance structure is predicated on yield rather than returns, with a performance fee of 20 percent of the vehicle’s yield over a 4 percent yield hurdle per year, after fees and expenses. Management fees amount to 50 basis points on uninvested capital and are capped at 65 basis points on the fund’s net asset value.

Documents from South Carolina’s Retirement System Investment Commission indicate the fund should have at least nine assets by the time it closes on Series 3, sometime in 2021. It currently owns stakes in two assets – the UK’s Cadent Gas and Finnish electricity distribution company Elenia – and will focus mainly on European regulated utilities, with up to 25 percent of the three-series capital-raise eligible to be invested in US, Canadian and Australian assets.

All investors would get exposure to all assets of the fund, regardless of which series they invest in. No co-investment is planned, and MIRA doesn’t rule out future fundraising series for the vehicle, “with investor protections”, according to the documents.

MIRA declined to comment on the fundraise.

The manager has a long track record of investing in European regulated utilities through its suite of Macquarie European infrastructure funds, the first of which closed in 2004. Across the five MEIF funds, the Australian manager has invested roughly €7 billion (increasing to about €14 billion, factoring in co-investments) in 11 assets, generating a gross IRR of 12.4 percent, a 1.8 times gross multiple and a 6.5 percent annual yield.

The focus on regulated and contracted assets is expected to intensify, partly due to changing macroeconomic conditions. “The pendulum is swinging back towards core [infrastructure],” JPMorgan Asset Management’s global head of alternatives, Anton Pil, told us late last year. “There was a time for more opportunistic investing, but I would say for the next three-to-five years, the focus on diversified cashflow, generative, stable, total-return-type investing is going to be key.”

Others are also seizing on the ‘super-core’ moniker, with Brookfield Asset Management currently raising Brookfield Super-Core Infrastructure Partners, its debut open-ended core infrastructure fund.