It was a classic shock: a team of industry veterans setting up a new unit for a blue-chip institution in a burgeoning field finds itself on the street seemingly from nowhere. That’s pretty much what happened to AllianceBernstein’s two-year-old infrastructure debt team, led by AMP Capital veteran Gerry Jennings.
“We have taken the strategic decision to focus our private credit opportunities in commercial real estate, residential real estate and middle-market lending and as such are exiting our infrastructure debt business,” AB explained with a whiff of ‘it’s not you, it’s me’ corporate efficacy.
To say most of us were caught by surprise is to put it mildly – there simply wasn’t any indication, judging by Jennings’ and the team’s presence in industry events and AB’s fully fledged infrastructure debt strategy, that its commitment to the space would prove woefully fleeting.
After all, when AB poached AMP veterans Jennings, Richard Lane and Tim Whishaw in 2014 (with ex-Arcus Infrastructure Partners member James Costine added later) to set up its in-house infrastructure debt team, it seemed to be signalling its seriousness about the asset class and its intention to be a key player in it.
That impression was reinforced by the robustness of AB’s debt strategy, which comprised two funds spanning senior and subordinated debt – targeting a combined $1.5 billion – and an adjacent, multibillion-dollar separate account strategy. These are not the actions of a company looking for a fling with a new market, more the actions of a firm laying the foundations for a long-lasting commitment to the space.
With AB ruthlessly exiting the stage, what does that say about the infrastructure debt market? On the face of it, not much, as its decision seems to genuinely reflect internal strategy. There was also talk of an increased US focus by senior management (including new members), which left the European infrastructure debt team out of place. But all of that seems to very much hint at internal versus external considerations.
That also chimes in with the wider infrastructure debt story. Those who have committed to the space are seeing their businesses flourish. BlackRock is a good example. Having started its separate accounts business in 2013 with $428 million under management, BlackRock had a booming $4.4 billion in AUM at the end of last year.
Macquarie Infrastructure Debt Investment Solutions can tell a similar story. Launched in 2012, the unit now manages upwards of £3 billion across its segregated accounts and its first £829 million UK-focused infrastructure debt fund. Buoyed by that success, MIDIS launched a second UK debt vehicle in April.
More widely, data from Infrastructure Investor Research & Analytics indicates there are 39 debt funds (including both pure debt and hybrid equity and debt funds) currently seeking just under $30 billion of capital – again, not the sign of a floundering space.
It’s not all rosy, though. Turn to p. 21 and you will find survey results from Probitas Partners showing declining interest in infrastructure debt funds. But it’s important to consider that a lot of the money flowing into the asset class is coming through separate accounts.
Bottom line: don’t read too much into AllianceBernstein’s departure just yet.