Macquarie rules but bank-affiliated funds on decline

Our second ranking of the 30 largest infrastructure investors in the world is dominated by independent fund managers and marked by the rise of several pension schemes.

It’s that time of the year again. No, not Christmas – although some of you will have cause to celebrate on this occasion too. It’s time for the second edition of the Infrastructure Investor 30 (II30), our annual ranking of the 30 largest infrastructure investors in the world.

This year’s II30 heralds plenty of changes and offers a tantalising glimpse at where the asset class is going. But change did not prevent Macquarie, the Sydney-based investment bank best known for its infrastructure investment activities, from again topping our ranking. 

The full listing is available here.

So without further ado, we present the main changes in this year’s II30.

Infrastructure is growing: This year’s ranking shows that the 30 largest investors in the world formed (either raised or committed capital) $183.1 billion in investment capital over the past five years – a more than 30 percent increase from the $140.5 billion totalled by last year’s debut ranking. That’s good news for the entire industry as it clearly illustrates that private participation in infrastructure financing is steadily increasing. 

Independents dominate: Contrary to last year’s II30, independent fund managers overtook bank-affiliated funds to compile the largest amount of capital for infrastructure – $54.9 billion versus $54.3 billion respectively.  There are several reasons behind this trend, including a proliferation of independent fund managers in recent years, but the most important point is that the independents are probably here to stay. Regulatory reforms that limit the amount of capital a bank may invest in its captive funds will almost certainly constrain banks’ ability to sponsor future funds. Another important point: some of the outsized capital raised by some banks during the height of the market – such as the $6.5 billion raised for Goldman’s first infrastructure fund in 2006 – will not help them in our annual rankings going forward as we only look at capital created in the last five years. Nevertheless, expect bank-affiliated funds to keep raising their fair share of capital, albeit from a smaller base. 

Rise of the pensions: Pension funds were some of the fastest climbers in this year’s ranking. The Canada Pension Plan Investment Board jumped to number 3 from 2010’s number 11. Dutch pension asset manager APG rose to number 5 from last year’s number 15. And QIC, Queensland’s public pension manager, leaped 13 spots to number 9 this year. These jumps are partly the result of the large cheques many of the pensions recently wrote to acquire new assets. And as more of them take an interest in the asset class, expect large pension funds to continue to figure highly in next year’s ranking.

Rivalries: Some interesting rivalries are encapsulated in this year’s II30. Look at numbers 21 and 22 on our table and you will find Arcus Infrastructure Partners and SteelRiver Infrastructure Partners – both spin-outs of former parent Babcock & Brown – virtually neck-to-neck. With SteelRiver currently on the fundraising trail, next year’s ranking might see the former siblings farther apart. Also of note is the cross-town rivalry between the Ontario Municipal Employees Retirement System (OMERS) and the Ontario Teachers’ Pension Plan (OTPP). In this year’s ranking, OTPP overtakes OMERS, ranking 11th versus OMERS’ 14th place. But last year, OMERS came in 5th, four spots ahead of OTPP’s 9th place. What will next year bring for the Canadian rivals?

Looking ahead: So how will 2012’s II30 look? Depending on how fundraising goes for its new European and North American vehicles, French fund manager Meridiam Infrastructure, currently at number 34 on our ranking, may become the first purely greenfield-focused fund manager to make it onto the list. Cheung Kong Infrastructure, the Hong Kong infrastructure owner and developer controlled by billionaire Li Ka-Shing, is another one to watch, given that it recently acquired EDF’s UK power grid and is currently studying more than 10 investment opportunities.

So stay tuned and keep an eye out for next year’s II30. Further change is inevitable.