The past couple of years have seen their lot of infrastructure fundraising successes – starting with Brookfield Infrastructure Partners’ $7 billion vehicle and Global Infrastructure Partners’ $8.25 billion closing.
Michael Halford, head of investment funds at law firm King & Wood Mallesons SJ Berwin, thinks the outlook for 2014 looks even brighter. “The fundraising market will continue to improve, and more funds will be raised,” he said during an interview with Infrastructure Investor.
Previously considered as a cloud over the head of investors, fresh regulation adopted in various legislations in 2013 should no longer be seen as a threat to those looking to set foot on the fundraising trail, he argued.
“For a long time people were worried about the impact of AIFMD and what it really meant. Now it’s come out and people can see it’s perhaps not quite as bad as they thought it would be.”
The same could be said of the Volcker rule in the US: with regulation now settling down, investors will now have more clarity about the rules of the games they are about to play.
“Investors want certainty when they put money in a fund and being certain about the legal and regulatory environment, in addition to knowing the risks associated with your investments, is important too.”
It will help that the European economy was on a firmer path towards recovery – with the threat of a Eurozone collapse slowly but gradually receding. In particular, well performing markets should continue to provide asset managers with more avenues for exit, which will help fundraisers in the process.
“Exits from previous funds generates track record and distributions people can invest in the new fund.”
This change in cycles could perhaps nudge the pendulum of power closer to fund managers, Halford added. Investors had been in a favourable position recently and had therefore negotiated very strongly the terms of the funds they’d invested in. But that might evolve slightly with there being a greater demand for funds.
The real bottleneck will perhaps lie in the limited availability of suitable targets, he argued, with low interest rates leading many to look for cash-yielding assets.
But he remains confident the fund model would retain strong relevance in next year’s market. “A lot of investors don’t have the size of teams to do direct investments themselves and in a low interest rate environment, infrastructure is quite attractive.”