Top guns

GLOBAL INFRASTRUCTURE PARTNERS III

Target: $12 billion with a $15 billion hard-cap

Duration: 10 years with four, one-year extension options and a five-year investment period

Status: Fundraising

Strategy: Ten to 14 investments, preferably majority stakes, in large-scale, complex core-plus infrastructure investments executed through joint ventures with industrial leaders and a focus on driving operational improvements in energy, transportation and water/waste sectors. 

What LPs like: GIP’s industry-leading team, including 57 investment professionals, 27 operational staffers and 15 administrative people; management’s ‘skin in the game’, which has seen it commit at least $230 million of equity across its funds, according to the Oregon Public Employees Retirement Fund; its performance, with Arkansas Teacher Retirement System quoting a net IRR of 15.7 percent across its two prior funds and a 1.5x Total Value to Paid In ratio (as of February 2016).

What LPs fear: Fund III’s enormous size has OPERF worried about style drift and management strain, and it was also concerned about the two prior funds’ unrealised potential, which stood at $7 billion across 14 investments (as of June 2015).

How much will it cost LPs: ATRS quotes a 1.75 percent management fee during the investment and subsequent periods, alongside a 20 percent carry and an 8 percent hurdle rate.

BROOKFIELD INFRASTRUCTURE FUND III

Size: $14 billion (original target: $10 billion)

Duration: 12 years with two, one-year extension options and a four-year investment period

Status: Closed

Strategy: Investments of between $400 million and $1 billion to seek control or co-control positions in core infrastructure assets in the transportation, renewables, utilities and energy sectors across North America, Europe, South America and Australasia. BIF III is looking for a gross IRR of 13 percent and a cash yield of 5 percent according to the New Mexico State Investment Council. 

What LPs like: Strong alignment of interests, demonstrated by Brookfield’s $4 billion contribution to Fund III; its global footprint and 100-year track record as an owner-operator of real return investments, including circa $50 billion of infrastructure assets overseen by over 150 professionals and 12,000 operating employees across the globe, were also highlighted.

What LPs fear: Texas Municipal Retirement System flagged political influences and foreign policy as concerns, given some of the markets Fund III invests in. OPERF singled out Brookfield’s $7.8 billion in unrealised value across 17 investments in its two previous funds (as of September 2015) as a worry.

How much will it cost LPs: Fund III will charge a management fee of around 1.5 percent, a carry of circa 20 percent and generate around 8 percent hurdle rate, according to Texas Municipal.

EQT III

Target: €2.9bn with a €4bn hard-cap

Duration: 12 years, with three, one-year extension options and a six-year investment period

Status: Fundraising

Strategy: Twelve to 14 investments of €50-€300 million in mid-sized companies in the transportation, energy, environmental, telecoms and social infrastructure sectors across North America and Continental Europe, in particular the Nordic countries, using a value-add strategy. 

What LPs like: OPERF and the New Jersey Division of Investment, which manages seven pensions, praised EQT’s stellar track record, including a net IRR of 35 percent and a gross multiple on invested capital of 3.4x for eight exits since 2008. EQT’s experienced team and its network of 250 independent investment advisors were also highly valued.

What LPs fear: OPERF is concerned that Fund III’s size increase might lead to style drift and management strain. It is also worried about currency risk, political risk and increased competition in the infrastructure space, but recognises EQT has mitigants in place for all of these issues.

How much will it cost LPs: Fund III will charge a 1.6 percent management fee (1.5 percent for first close participants), a 20 percent carry and a 6 percent hurdle rate, according to the New Jersey Division of Investment.