When our third-quarter figures finally came through, we knew something special was going on: with a few months still to go before the end of the year, 2018 was already the biggest on record, with just shy of $69 billion raised by 43 funds compared with over $67 billion amassed by 71 funds in 2017.
With closes still happening every other week and some decent-sized funds like Italian manager F2i’s €3.6 billion third fund and US manager Digital Colony’s $3.3 billion debut offering yet to officially wrap up – at press time – it’s likely 2018’s tally will end up near (or maybe even above) the $80 billion mark.
Unsurprisingly, a diminishing number of larger funds are dominating the unlisted infrastructure space. Of the $69 billion raised by managers through funds that held a a final close in the first nine months of 2018, $40 billion was collected by the top 10 largest funds, accounting for 60 percent of the total year raise.
That brings the average unlisted infrastructure fund size in Q1-Q3 2018 to $1.6 billion.
Without a $15.8 billion GIP-like behemoth closing this year, we are very much seeing the rising tide that lifts all boats, with practically every fund manager out there with a solid track record experiencing a meaningful increase in fund size.
But there were three closes that stood out for being on or above $7 billion – KKR Global Infrastructure Investors III ($7.4 billion), Stonepeak Infrastructure Fund II ($7.2 billion) and ISQ Global Infrastructure Fund II ($7 billion). Most impressive is the fact that each of these managers more than doubled the amount raised compared with their predecessor funds in the series.
Looking ahead, 2019 could be even more exciting. A quick back of the envelope calculation shows that, between the return of Brookfield and GIP’s flagship offerings and follow-up vehicles by EQT, Antin and Ardian, an astounding $60 billion might be raised by, literally, just a handful of funds. Throw in another $10 billion as Blackstone wraps up the first phase of its $40 billion open-ended fundraising – plus everyone else on the market – and there’s a decent chance 2019 could get to the $100 billion mark – assuming fundraising carries on at the current brisk clip.
So, what could spoil the party? At this point, it’s almost certain we are due another financial crisis, even if no one knows where it will originate and how intense it will be. Historically, infrastructure has a good track record in times of crisis. But, as managers are fond of writing in their prospectuses, past performance is no guarantee of future results.
The clear and present danger, though, is populism. A UK Labour government following through on nationalisation or an investigation into the collapse of Italy’s Morandi Bridge that ends up stripping Autostrade of its entire concession would send alarm bells ringing. Add up a few of these occurrences and a serious bout of capital flight could ensue.
Were that to happen, 2018 would go down in the history books not as the start of a golden age of infrastructure fundraising, but as the year this incredible growth story finally began to crack.