Nervous optimism

Infrastructure fundraising is showing signs of life. A cause for optimism? Perhaps, though it may be too early to tell.

An old Wall Street saw about a nervous investor is particularly relevant today. The investor is nervous, the story goes, not because of turmoil in the markets but because he’s optimistic and doesn’t know whether his optimism is justified.

In the infrastructure space, the recent spate of fund closings is causing much nervous optimism.

A time for
optimism?

Consider this: in the first six months of this year, InfrastructureInvestor got word – through press releases or market sources – on just eight closings for infrastructure funds. Excluding energy private equity funds and multilateral funds like the IFC’s infrastructure crisis facility, they were infrastructure funds managed by ADIC-UBS, HSBC, Prescient Fieldstone Investment Management, Standard & Chartered (which held two closes for its Asia infrastructure growth fund earlier this year), Brookfield Asset Management, Alterna Capital Partners and JPMorgan.

Then, in the third quarter of this year, we came across nine infrastructure fund closings, more than half of which came in just the last month. Among them were funds managed by First State, Actis, Pantheon, Brookfield (Colombia and Americas funds), DIF, Cube, Fortis Investments and Macquarie Group (CIS fund).

Taking all these figures into account, InfrastructureConnect, our proprietary fundraising database for infrastructure, estimates that $8.9 billion has been raised for the asset class through September of this year. True – it’s nothing like the 2008 levels of $66.4 billion, but it is still much better than earlier estimates we’ve come across.

So could it be that fundraising is finally starting to pick up? As one European fund manager recently told us, “it’s not all doom-and-gloom out there”. True enough, given that so many of the above names hail from Europe. Emerging market, country-specific and regional funds also seem to be faring well.

What about the US? Though we’ve reported on a couple fundraising successes in the America – like the Brookfield Americas Infrastructure Fund, which has been attracting capital at a steady clip – one cannot sugarcoat the fact that the US market’s been a difficult place to deploy and raise capital in the wake of the credit crisis.

But as evidenced by the 60 or so managers who responded to the Pension Consulting Alliance’s request for information for infrastructure managers on behalf of US pensions, there is still strong thirst for capital from US-based investors. And, based on what we’re hearing from some pensions who participated in the request, there is strong interest to provide that capital when the right time comes.

A cause for optimism? Perhaps – but not without a tinge of nervousness.