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Not so calm before the storm

Asset prices are rising. US interest rates have gone up. Large pension funds keep going direct. Renewables subsidies are being cut, regulatory risk remains. The list of potential headwinds hitting managers looking to raise funds is not getting any shorter.

And yet, institutional investors again refused to take a rain check last year. That was despite an impressive effort in 2014 – the best year on Infrastructure Investor’s records – with $55.14 billion raised through 77 vehicles. Fund managers pretty much held steady over the last 12 months, collecting $48.1 billion via 72 final closes during the period.

Household names helped maintain the momentum. The US’ Arclight Energy Partners and Blackstone, for instance, ranked first and second on the podium with $5.75 billion and $4 billion raised respectively. Kohlberg Kravis Roberts (KKR) reached a final close on its sophomore infrastructure offering on $3.1 billion. Dutch-based DIF managed to corral €1.15 billion for its fourth fund in less than six months.

But newcomers and differentiated strategies also scored high on the list. New York-based I Squared closed the largest debut fund since the financial crisis on €3 billion, while Copenhagen Infrastructure Partners garnered €2 billion for one of Europe’s largest renewable vehicle. The UK’s Hermes GPE pocketed £1.16 billion, while Australia’s First State collected a total of €2 billion for its flagship European fund, by topping it up with €721 million during a fifth fundraising round launched in May 2014.

Global offerings dominated the picture, getting three times as much as Europe-focused ones alone. The US was a close follower, while Asia-Pacific saw an incontestable awakening. Emerging markets excluding Asia registered some interest, but numbers remained fairly modest in comparison.

More striking perhaps was the ranking of most favoured sectors. Diversified funds, unsurprisingly, came first, but the year also saw traditional energy emerge as a clear leader, surpassing areas such as renewables, social infrastructure and transport. Many traditional energy managers dedicated to the field have gone back to market earlier than expected, closing oversubscribed offerings above their hard-caps. Increasingly, these have moved away from pure oil and gas plays to include power generation assets, following on large-scale deals closed over the past few years.

Funds larger than $1 billion represented 21 percent of the number of vehicles closed last year. Making predictions for the year ahead is a daring exercise. But with industry giants currently on the road to raise record sums of money and a healthy number of closings in January (see p.16), mega-funds can safely be expected to impact stats again in 2016.