Macquarie has reached a first close on the UK’s first inflation-linked infrastructure debt fund eight months after officially launching the vehicle.
The Australian-headquartered asset manager has so far collected £579 million (€729 million; $909 million) for the fund, which on its creation last March had a target “in the hundreds of millions”, James Wilson, co-head of Macquarie’s Infrastructure Debt Investment Solutions (MIDIS) unit told Infrastructure Investor then.
Macquarie’s UK inflation-linked infrastructure debt strategy as a whole – which includes the fund as well as a number of separately managed accounts – has now raised commitments from 11 institutional investors totalling £979 million.
“Institutions have a clear and immediate need for predictable long-term cash flows that help reduce funding level volatility. Infrastructure debt can provide this as well as helping to address pension scheme deficits, through the illiquidity premium it provides above the returns available on corporate bonds and gilts,” said Andrew Robertson, co-head of MIDIS, in a statement.
Macquarie expects to complete a second close on the fund during the second quarter of 2015 that would bring the total pledged to the overall strategy to £1.25 billion, boosting the total committed to its global infrastructure debt platform to £2.2 billion.
The firm told Infrastructure Investor in March that no target had been fixed for the fund.
Macquarie has been investing in infrastructure debt since December 2013, when an unnamed pension scheme committed £200 million to the strategy. The fund, which focuses solely on investment-grade debt, targets an average return of 200 to 250 basis points (bps) above index-linked gilts.
“Our investors will benefit from a significant near-term pipeline of assets in the power, renewables and utility sectors,” said Wilson.
Macquarie estimates the annual pipeline of inflation-linked debt products to be worth around £4 billion, comprising £1.5 billion in utilities’ network upgrades and refinancings, up to £2 billion of lending to renewable projects and £500 million dedicated to offshore transmission assets (OFTO).
The new commitments announced today complement MIDIS’s existing mandates, which are invested in fixed and floating rate debt across Europe and the UK in a range of currencies.
“We are finding that borrowers are often looking for a mix of inflation-linked and fixed or floating rate debt,” said Robertson. “We have already received strong interest from a range of European and Asian investors.”