If last year hinted at the strength of the sector, this year confirmed it – with the eighth edition of our ranking of the world’s largest infrastructure investors showing managers sitting on more money than ever.
It is the second year since we formally expanded it to 50 firms and 2017’s report shows an impressive 12 per cent rise in funds raised to $316 billion, from $282 billion in 2016. That will come as no surprise if you’ve been following our fundraising coverage and its steady stream of headlines detailing oversubscribed closes and frequently revised hard-caps.
Similar to last year’s II 50, you will find that a significant portion – $122 billion, or 38 percent of the amount raised – is concentrated in the hands of the top five managers.
However, what hasn’t changed is that Macquarie Infrastructure & Real Assets still reigns supreme with $36.5 billion raised, holding its position – which it has maintained since inception – at the top of the II 50. Brookfield, with $29.9 billion, is still within touching distance and it’s hard not to look at the top three spots and wonder if MIRA’s reign, fuelled by a multi-pronged strategy of regional vehicle, won’t finally end when the next mega-fund from Brookfield or Global Infrastructure Partners emerges (GIP sits at number three with $26.8 billion raised).
Speaking of mega-funds, Blackstone’s $40 billion open-ended vehicle, anchored by a $20 billion commitment from Saudi Arabia’s Public Investment Fund, is sure to make its presence felt in the ranking once it formally achieves a close.
A full explanation of our methodology can be found in the following pages, but we are still measuring capital raised over an approximate five-year period – for the purposes of this edition of the II 50, covering the period between 1 January 2012 and 31 August 2017.
As always, there are some notable changes to this year’s edition, starting with two new entrants from Asia: Ping An Asset Management, charting at 26 with $3.7 billion amassed; and China Communication Construction Company, sitting at 41 with $2.4 billion. Also worth noting, and definitely a sign of the times, is the presence of the Green Investment Group (formerly known as the UK’s Green Investment Bank, prior to its acquisition by Macquarie Group) and Mirova – two outfits with strong clean energy credentials – sitting at number 49 and 50 with $1.4 billion and $1.3 billion raised, respectively.
But it’s not all about the newbies. BlackRock, following the acquisition of First Reserve, leapt an impressive 19 places to land at number six with $11.2 billion raised. And French outfit Antin Infrastructure Partners climbed 14 places to number 10, with $7.4 billion.
There are many other such stories in the II 50. But the bigger picture, continuing from last year, is one of enduring strength, with more money being raised than ever. With the holiday season not far off, that’s not a bad Christmas gift for the asset class.
The 2017 Infrastructure Investor 50: Rules and definitions
What is the Infrastructure Investor 50 and how do we determine the rankings?
The Infrastructure Investor 50 ranks fund managers by the amount of capital raised by infrastructure direct investment programmes over five years. This year, the five-year window spans from 1 January 2012 until 31 August 2017.
Where two firms have formed the same amount of capital over this time period, the higher Infrastructure Investor 50 rank goes to the firm with the largest active pool of capital formed since 2012. If there is still a “tie” after taking into account size of single capital formation, we give greater weight to the firm that has formed the most capital within the past one or two years.
Accuracy and Confidentiality
We give highest priority to information that we receive from the fund managers themselves. When the infrastructure fund managers confirm details, we seek to “trust, but verify”.
Some details simply cannot be verified by us, and in these cases we defer to the honour system. In order to encourage co-operation from the industry, we do not disclose which firms have aided us on background and which have not.
Lacking confirmation of details from the firms themselves, we seek to corroborate information using available annual reports, press releases, limited partner disclosures, etc.
Infrastructure: The definition of infrastructure investing, for the purposes of the Infrastructure Investor 50, means committing equity capital toward tangible, physical assets, whether existing (brownfield) or development-phase (greenfield) that are expected to exhibit stable, predictable cashflows over a long-term investment horizon. The investors need not seek to own the assets in perpetuity and may exit them, realising a capital gain and generating an internal rate of return for themselves or their end-investors. However, they must primarily dedicate their investment programmes toward the pursuit of assets and projects that exhibit cashflow stability and predictability and cannot be counted if they’ve made large one-off investments in the asset class on an opportunistic basis. There will certainly be grey areas regarding these parameters, but Infrastructure Investor will make every effort to ensure that the capital counted for the purposes of the ranking will fall within our definition of infrastructure to the furthest extent possible.
Below is an extract from our definition of “infrastructure”:
“Infrastructure is the term that covers the man-made facilities that enable any economy to operate. It can be segmented further into three broad types: transportation (e.g., railways, roads and airports), utilities (e.g., energy generation and distribution, water and waste processing and telecommunications) and social infrastructure (e.g., schools, hospitals and state housing) …”
You will see that the emphasis is on the assets themselves rather than on associated services and technology. In our five-year total, only capital allocated to infrastructure is included, as defined above. Where the investments are made in what may be termed a “grey area” between infrastructure and private equity, we reserve the right to make the final judgment based on applicability according to our definition.
Capital raised: This means capital definitively committed to an infrastructure direct investment programme. In the case of a fundraising, it means the fund has had a final or official interim close after 1 January 2012. You may count the full amount of a fund if it has a close after this date. And you may count the full amount of an interim close (a real one, not a “soft-circle”) that has occurred recently, even if no official announcement has been made. We also count capital raised through other means, such as co-investment vehicles and deal-by-deal co-investment capital.
What counts as capital raised
Limited partnerships: In most cases, infrastructure fund managers raise money through commitments to limited partnerships. Investment capital can be raised in other ways – for example through contributions from an affiliated entity – in which case we seek to accurately determine how much investment capital has been created for the financial sponsor in question over the specified five-year period.
Co-investment vehicles: Where appropriate, we count LP co-investment vehicles into a fund manager’s capital fundraising total. The reason is that the co-investment vehicles reflect a fund manager’s deal-making prowess and represent direct investment capital created for the asset class. However, the co-investment capital must be invested alongside a primary limited partnership, not established for a one-off deal or separate account.
Public entities: We count the capital raised by infrastructure fund managers that happen to be publicly traded.
Seed capital or GP commitment: You may count as capital raised any seed capital committed to any fund raised by your firm.
Affiliated programmes: You may count infrastructure capital raised by affiliated entities so long as your firm has control over those entities, or the vehicles raised bear the clear branding of your firm.
What DOES NOT count as infrastructure
Funds of funds: We do not count funds of funds in our rankings. Credit for capital raised by funds of funds is reflected in fund managers’ direct capital raised, so to avoid double-counting, we exclude funds of funds.
Separate accounts: An asset manager cannot claim credit for a separate pool of capital being managed on behalf of a pension plan as it is not a blind pool of capital originated for private investment at the discretion of the manager.
Real asset strategies: Real assets such as timber, commodities, and natural resources cannot be counted toward the capital-created total. While such strategies are like infrastructure in that they provide an investment in a physical, tangible asset or contain an element of inflation protection, they do not meet the core criteria of providing exposure to stable, predictable, long-term cashflow streams (timber demand, for example, is cyclical, as are commodities and natural resource-driven strategies such as oil and gas exploration).
Real estate: We do not count capital deployed in property ownership strategies.
Club deals: Similar to our rationale for separately managed accounts, in which capital is pledged to a sponsor but the end-investors have the discretion over whether to invest, we do not count club deals in our rankings.
Debt investment funds: Our rankings focus on equity committed to the asset class, so we exclude all debt-focused vehicles and commitments, including mezzanine debt.
Private equity: We do not count capital deployed primarily in private equity strategies (i.e. buyouts of operating businesses in various economic sectors). Infrastructure investors may, of course, invest in operating businesses, but the businesses must exhibit and be purchased primarily for their ability to produce stable, long-term cashflows.
Hedge funds: We do not count hedge fund strategies as these primarily rely on indirect investments such as listed securities that may have exposure to infrastructure assets, not the assets themselves.
What DOES NOT count as capital raised:
Expected capital commitments: No matter how confident you are about your eventual fundraising goals, we do not count “soft-” or “hard-circled” commitments – only official final and interim closes.
Opportunistic capital: An entity that has the ability to opportunistically do large infrastructure deals, but does not have a dedicated programme or team for doing so, will not be counted.