Manulife exceeds debut with $4.65bn second fund close – updated

The fund launched last year with a $2.6bn target and twice raised its hard-cap before closing, says Recep Kendircioglu, head of infra investments.

*Updated: An earlier version incorrectly stated Fund II closed on double the amount its predecessor raised. That confused the amount raised by Fund I from external Manulife investors with Fund I’s total size. We apologise for the mistake.

Manulife Investment Management has raised $4.65 billion for its second US-focused, mid-market infrastructure fund, some $650 million more than the $ 4 billion raised for its debut vehicle, closed in July 2018.

The asset management arm of the Canadian insurer launched Manulife Infrastructure Fund II late last year with a $2.6 billion target. However, that was initially sized down due to the wave of covid-19 at the time, Recep Kendircioglu, the group’s co-portfolio manager and head of infrastructure investments, told Infrastructure Investor.

“We didn’t know what to expect,” he explained. “We put a cap at $4 billion and at final size we still had some unmet demand so we lifted it to $4.5 billion [before closing on $4.65 billion]. We kept finding good deals and people saw we were investing and finding good value in a covid environment.”

The second fund, as with the first, was funded through a mix of internal Manulife commitments ($2.25 billion) and external investors ($2.4 billion). However, the maiden attempt was seeded with existing Manulife infrastructure assets, which Kendircioglu said accelerated the fundraising process.

Fund II has made six investments to date, three within the telecoms sector including a data centre company, a small cell wireless network company and a group with exclusive rights to develop network equipment across the New York subway. It has also made two renewables deals in battery storage group Hunt Energy Systems and distributed solar platform Clean Capital. The portfolio also includes Elizabeth River Crossings, a tunnels network in southern Virginia.

“Today the hottest markets for us are renewable energy and transportation,” Kendircioglu said. “In Fund I, we had some more traditional utility investments and gas plants. As the market consolidated, it was not easy to find utility investments and we believe in the energy transition, so there are still some gas plant opportunities but it’s hard for us to make them work economically because we have a view on the terminal value of gas plants, which is not as constructive as it used to be.”

The fund is focused on the US and Kendircioglu said some of its portfolio companies could expect tailwinds from renewable energy and battery storage provisions in the recently passed $1.2 trillion infrastructure bill. The fund is targeting gross returns of 12 percent, although Kendircioglu said the first fund is currently generating 15 percent.

“Our strategy is finding industrial partners or strategic players,” he added. “We find management teams and development teams looking for a partner rather than sell 100 percent control.”