If more proof were needed that the fixed income industry is seriously sizing up the infrastructure debt space, Western Asset Management’s recent announcement that it is launching a UK-domiciled infrastructure debt fund should help dispel any lingering doubts.
Western Asset Management, with some $462 billion under management globally, is Legg Mason’s fixed income subsidiary. It is launching a £1 billion (€1.2 billion; $1.5 billion) UK-domiciled infrastructure debt fund later in March targeting publicly-traded infrastructure debt securities across different industry sub-sectors and domiciles.
“The fund could have a capacity of up to £1 billion,” a spokesman told Private Debt Investor, Infrastructure Investor's new sister publication on private debt. “Western would be pleased if it raised between £100m and £300m in the first 12 to 18 months,” he added.
“The rising demand for infrastructure spending and reduced bank and government financing will see more debt issued in the public markets,” Mike Zelouf, head of Europe, Middle East and Africa at Western explained. “The fund can be complementary to such private investment channels, as it offers greater liquidity and transparency.”
Western said it would be placing greater emphasis on bonds of infrastructure businesses that have a leading position in their sector, generate attractive and reliable cash-flows and benefit from the pricing power their dominant position affords them.
Only a quarter of the fund will be invested in ‘non-core’ securities, issued by businesses that engage in infrastructure activities and debt issued by infrastructure providers in Asia, Australia and the Americas, the fund manager said. The rest of the total assets will invest in ‘core’ infrastructure debt securities that are predominantly issued by European businesses.