The rise of the independents

This year's Infrastructure Investor 30 highlights several nascent trends that indicate how the asset class is growing and changing to incorporate a larger pool of diverse investors from around the globe. Here are five things to ponder as you glance at this year’s list of the 30 biggest investors in the asset class.

Getting larger

This year’s rankings indicate that the asset class is getting larger. Last year’s Infrastructure Investor 30 totaled $140.5 billion in capital formed over the past five years. This year’s top 30 investors totaled $183.1 billion – an increase of more than 30 percent.

This year’s top 30 investors are larger in size than last year’s. The average investor to make it onto the list this year had assembled about $5.2 billion of capital for the asset class, versus $3.8 billion last year. Or, to put it another way, to make it to the list this year, you had to have at least $2.63 billion, versus $1.86 billion last year. These were the number 30 spots in 2011 and 2010, respectively.

Some of this had to do with greater cooperation from firms in verifying the size of their investment programmes. But some investors edged their way onto the list – or up the list – by raising more capital and doing larger deals than their peers.

Fast climbers

If you’re wondering why your firm got pushed down the ranking this year, a few active pension investors may help explain that. 

The Canada Pension Plan Investment Board catapulted from number 11 on last year’s Infrastructure Investor 30 to number 3 this year, thanks in large part to the capital it formed for a number of large, high-profile deals the pension closed in the last year. These included the C$3.4 billion (€2.5 billion; $3.5 billion) acquisition of Intoll, the toll road operator that split off from Macquarie Infrastructure Group last year, as well as the purchase of an additional 10 percent stake in the 407 highway from Cintra for C$894 million.

QIC, Queensland’s public pension manager, also made a giant leap in the rankings. QIC went from 22 last year to number 9 this year, a jump of 13 spots. This is thanks in part to the Australian province’s ongoing asset sales, which have given QIC plenty of capital for buying opportunities. Most recently, the province transferred ownership of its road network, Queensland Motorways, to QIC in a A$3.1 billion (€2.3 billion; $3.3 billion) deal. The deal followed an announcement last November that Queensland would transfer the motorways to QIC rather than sell or lease them to the private sector.

Other fund managers have had solid fundraising years. A case in point is France’s AXA Private Equity, which came in at number 31 last year. This is in no small part thanks to the quick fundraising for the firm’s third fund, which had collected an additional €370 million for AXA’s infrastructure programme in the last year, just enough to get it over the hump.

Fund managers on top

This brings us to the topic of independent infrastructure fund managers, which switched places with investment banks this year as the type of investor representing the most capital created in the asset class. Last year, you may recall, bank-affiliated funds dominated the list with $48.6 billion, or 34.6 percent of the $140.5 billion Infrastructure Investor 30 total capital created. Fund managers were close behind with $47.9 billion. This year, fund managers came in on top by representing $54.9 billion of the capital created, versus $54.3 billion for the investment banks.

One can ascribe this changing-of-the-guard to several reasons.

Recent years have seen a proliferation of independent fund managers, thanks in part to spin-outs from investment banks and financial sponsors, as well as the increasing interest in the asset class from the investor community more broadly. And many of the fund managers, such as Alinda, Highstar and Energy Investors Funds, have enjoyed success raising steadily larger successor funds, which help drive their numbers higher.

Expect this trend to continue. Successful bank-affiliated funds will certainly continue to raise their fair share of capital. But longer-term trends, such as regulatory reforms that limit the amount of capital a bank may invest in its captive funds, will certainly constrain banks’ ability to sponsor future funds, making it necessary for the two to part ways. And the outsize capital raised by some banks during the height of the market – such as Goldman Sachs’ first infrastructure fund, which raised $6.5 billion in 2006 (those were the days) – will not help them in our annual rankings going forward as we only look at capital created in the last five years.


This year’s Infrastructure Investor 30 also contains within it a couple of interesting rivalries between firms that will have to be resolved in future rankings. First, there’s what you might call the Babcock twins: fund managers Arcus Infrastructure Partners and SteelRiver Infrastructure Partners, which spun out of former parent Babcock & Brown in July and May 2009, respectively. The two
firms are now virtually neck-and-neck in the rankings, with Arcus at number 21 and SteelRiver at number 22. Will SteelRiver’s second fundraise help it overtake Arcus? We’ll see in next year’s rankings.

Then there’s cross-town pension investors Ontario Municipal Employees Retirement System (OMERS) and the Ontario Teachers’ Pension Plan (OTPP), which look after the retirements of the Canadian province’s public employees and teachers, respectively.

OMERS and OTPP are some of the biggest, oldest and most active investors in infrastructure, as evidenced by their joint £2.1 billion (€2.4 billion; $3.4 billion) bid for the UK’s HS1 rail link last year. But in our 2011 Infrastructure Investor 30, OTPP overtakes OMERS, ranking 11th versus OMERS’ 14th place. Last year, OMERS came in 5th, four spots ahead of OTPP’s 9th place. It will be interesting to see how this cross-town rivalry evolves in future years.

And, further down, there is another rivalry brewing in France.

Antin Infrastructure Partners and Cube Infrastructure, outside the 30 at numbers 43 and 44, respectively, each raised about €1 billion for their first funds in 2010, placing them in close proximity. A second fundraise will likely help resolve this rivalry in future years.

A peak into the future

A look just below the top 30 can also help us predict what the Infrastructure Investor 30 of the future may look like. 

At number 34, French fund manager Meridiam Infrastructure may make it on to future iterations of our rankings if fundraising for its $1 billion North American fund and €1 billion European fund, goes well. That would make Meridiam the first purely greenfield focused fund manager to make it onto the list.

Another investor to watch is Cheung Kong Infrastructure Holdings, the Hong Kong infrastructure owner and developer controlled by billionaire Li Ka-Shing. Though Cheung Kong comes in at number 45 in our rankings this year, the company said in a recent statement that it is “continuing “to propel our acquisition momentum forward” and is studying more than 10 investment opportunities around the world. As its £5.78 billion acquisition of EDF’s UK power and grid business demonstrates, Cheung Kong is capable of reeling in big fish and if it continues to go fishing, it may well find its way on to the Infrastructure Investor 30.

Sovereign wealth funds are also worth watching. Though the Abu Dhabi Investment Authority, the investment arm of the United Arab Emirate, ranked at 52, the steady clip of large deals it has participated in, such as the $2.1 billion Port of Brisbane acquisition in Australia and the $1.16 billion Chicago Parking Meters privatisation, indicate it may become a large player in the asset class in the future. So stay tuned and keep an eye out for next year’s Infrastructure Investor 30. Further change is inevitable.