A positive half-term report

When we released our Q1 fundraising figures earlier this year showing a sharp drop in the amount of unlisted, closed-ended capital raised, we urged the market, somewhat tongue in cheek, not to panic.

We listed several reasons for that, which you can revisit here, but chief among them were the fact that a quarterly snapshot captures a limited moment in time and that the methodology that we (and most of our competitors) use to track fundraising – funds closed in a quarter – can produce skewed totals, particularly when big funds hit a final close – as was forcefully illustrated by Global Infrastructure Partners’ $15.8 billion third fund close in Q1 2017.

In that sense, looking at our preliminary fundraising totals at the half-yearly mark offers a better sense of how the market is fairing. So, how’s 2018 doing so far? Pretty good, actually. Our figures show that just north of $36 billion was raised by unlisted, closed-ended funds, which compares favourably with the $43.14 billion raised in the first half of last year, particularly when you strip away GIP III.

The amount raised during the first half of the year looks even better when you factor in that some of the year’s biggest closes – I Squared Capital’s $6.5 billion sophomore fund and KKR’s and Stonepeak’s $7 billion third funds – have yet to occur. And, of course, our total does not include the $5 billion raised at first close by Blackstone’s $40 billion unlisted open-ended fund, one of the largest debut first closes in the industry.

That sets the stage for a second half that should be at least as strong – and likely stronger, and a year-end total that could be closer to the mid-to-high $60 billion range than the circa $60 billion totals of previous years. There’s certainly a decent chance this year’s unlisted, closed-ended tally will surpass the record-breaking $64.69 billion raised in 2017.

All of which lines up well with the asset class’s heightened status with institutional investors, a running theme. A few weeks ago, for example, we reported on a survey of 65 sovereign wealth funds and public pension funds – with total AUM of $11.6 trillion – showing these institutions are planning to invest up to $130 billion in infrastructure over the next two years.

Segmentation, another running theme, also pans out in our H1 figures, with the two-largest funds closed – Copenhagen Infrastructure Partners III and Macquarie Asia Infrastructure Fund II – dedicated to a specific sector (renewables) and region (Asia), respectively. And while most of the large closes expected later this year stick closer to the global, diversified vehicles which are the norm, Digital Colony’s $3 billion telecommunications fund, set to close in H2, threatens to become one of the biggest sector funds ever raised.

What’s more, with the anticipated launch of new flagship vehicles from heavyweights Brookfield and GIP later this year – which could raise up to $20 billion apiece – not to mention the likes of EQT, Macquarie and Ardian in 2019, fundraising shows no signs of abating next year. That’s alongside a buoyant direct investment market, spearheaded by some of the world’s largest pensions and sovereign wealth funds, and the growing listed infrastructure sector.

So, while infrastructure GPs might cast envious looks at the $200 billion-plus raised last year by a fledgling class like private debt, they should be happy with where infrastructure is heading: after all, this is what sustained – and sustainable – growth looks like.