A new branch for Oaktree

The growing popularity of infrastructure is often stressed by looking at the increasing amounts of institutional capital allocated to the asset class. But another indicator is arguably equally as informative: the acquisition of infrastructure fund managers by larger asset management businesses.

The latest firm to make such a move is Oaktree Capital, the Los Angeles-headquartered alternative assets manager, which last month signed a deal to buy infrastructure fund manager Highstar Capital for an undisclosed sum.

Ian Schapiro, an Oaktree managing director and portfolio manager, will be responsible for the integration of the Highstar team into Oaktree. The firm believes that Highstar will be a good fit with its Power Opportunities team, led by Schapiro.

Whereas Power Opportunities has since 1995 been investing in companies providing products and services that support energy and utility infrastructure, Highstar has been investing in the physical infrastructure itself.

“Highstar is a pioneer in infrastructure investing and a leader in US energy infrastructure, waste management and transportation public-private partnerships – a skillset that is highly complementary to Oaktree’s Power Opportunities strategy,” said John Frank, Oaktree managing principal, in a statement.

The statement added that the transaction is expected to complete – subject to customary regulatory and other approvals – in the third quarter of this year. At that point, Oaktree will become manager of Highstar Fund IV, which had $2.3 billion of assets under management at the end of December last year.

New York-based Highstar’s first fund, in partnership with insurance and financial services giant AIG, closed on $407 million in November 2000. It went on to raise three further funds: AIG Highstar Capital II, which closed on $800 million in July 2005; AIG Highstar Capital III, which collected $3.5 billion; and Highstar Capital IV, the first raised since Highstar’s independence from AIG in 2010, which closed on $2 billion in May 2012.

“We couldn’t have hoped for a better new home for our team,” said Highstar founder and managing partner Christopher Lee as the deal was announced. It certainly is now part of a much bigger family.