Probitas: $110bn of infrastructure funds coming to market

But even as there are more managers seeking more money in the asset class than ever before, the weak fundraising environment is making it difficult for the 99 funds in market to reach their targets. Meanwhile, investors are demanding lower fees, closed-end fund structures and independent management teams, according to a survey by placement agent.

There are more investment managers seeking more money for infrastructure than ever before, but investors are committing less money to the asset class and demanding lower fees, according to the newest survey of institutional investors published placement agent Probitas Partners.

Probitas’ latest round-up of funds in market or thought to be coming to market in the next 12 months lists 99 funds seeking a total of $110 billion, up from 63 funds seeking $94 billion at around the same time last year.

But while the number of funds in the market is going up, the amount of money raised is still going down on a year-over-year basis. Only $5.3 billion was raised for infrastructure through in the first nine months of this year, with $1.6 billion of that coming in the first quarter, $2.4 billion in the second quarter and $1.3 billion in the third quarter. In the first nine months of last year, infrastructure funds had raised $21.5 billion, according to Probitas.

And investors seeking capital should be prepared to encounter preferences such as lower fees, closed-end fund structures and independent management teams, though it remains as important as ever to tailor preferences to specific strategies within the asset class, according to the survey.

No simple answers on fees

The survey of 160 institutional investors in the asset class revealed that 77 percent thought management fees for brownfield-focused infrastructure funds should be less than 1.25 percent, while 43 percent said 1 percent or less. And more than 50 percent believed brownfield funds should charge carried interest, or performance fees, of 10 percent or less.

There's nothing in this market that is simplistic

Kelly DePonte



Brownfields, or existing infrastructure assets, are often thought of as safer, lower-yielding investments because of their mature operational status, versus greenfields, or assets that have yet to be built. This was reflected in Probitas’ survey: 64 percent of investors interested in brownfields said they are targeting net returns of 10 percent to 12.5 percent per year, while investors preferring greenfields said they are targeting 12.5 percent to 17.5 percent. But investors were also willing to pay more to execute a greenfield strategy, with 30.4 percent saying they think greenfield funds should charge management fees between 1.25 percent and 1.5 percent.

“You can’t just say that management fees for infrastructure funds should be – pick a number, say 1 percent. Because what you’re really going to have [to look at] is: what is the underlying strategy of the fund, what is its risk-return profile, and how are you calculating that 1 percent?” said Kelly DePonte, a partner at the San Francisco-based firm.

“There’s nothing in this market that is simplistic,” he added.

Digging in on fund structures

Probitas’ survey also found no clear investor preference for fund structure. Nearly 29 percent of respondents said they preferred a standard 10-year private equity-style fund structure, up from 24 percent in last year’s survey. On the other end of the spectrum, open-end or evergreen funds, which have unlimited life, were preferred by 13.4 percent of respondents, down from 16.7 percent in last year’s survey.

“I would have expected more interested in evergreens, but that certainly was not the case,” DePonte said. “Ten-year structures really seem to have dug themselves in in this market and it will take longer to change than I would have expected,” he added.

Ten-year structures really seem to have dug themselves in in this market

Kelly DePonte



One preference, though, which seemed pretty clear from the survey was investing in independent infrastructure funds, or funds owned by an run by investment professionals unaffiliated with outside sponsors, such as investment banks. This year, 71.8 percent of respondents said they preferred investing in independent funds, versus 58.2 percent last year. Sponsored funds, or funds owned by larger financial institutions, were preferred only by 8.1 percent of respondents, versus 23.7 percent last year.

“Really big shifts, and the biggest reason for that, in informal chats with people, basically is they look at what happened with funds raised by Babcock & Brown and Allco, and even some of the funds raised by Macquarie . . . all of a sudden the person you thought was sponsoring the fund is having real problems and what you perceived as a benefit is no longer there,” DePonte said.

Babcock and Allco are Australian asset managers which collapsed in 2008 and 2009, respectively, leaving their funds to spin-out in order to survive on their own. Macquarie, a global investment bank based in Australia, has survived the financial crisis but has been cutting ties with its externally managed funds, often in exchange for hefty separation fees.

Strong interest

Despite these hiccups, infrastructure is still popular among institutional investors. Respondents to Probitas’ survey ranked it third – behind distressed debt and US middle-market buyout funds – in terms of what asset classes they will focus on next year.

There is still a lot of interest in this sector from LPs

Kelly DePonte



DePonte warned that the survey was targeted at people with a strong interest in infrastructure. So among a broader audience, it might not rank as high. But infrastructure is likely to remain a hot among limited partners (LPs) looking to put capital to work.

“There is still a lot of interest in the sector from LPs,” DePonte said.

The latest Probitas fundraising list, re-ranked by target size and converted at spot rates as of press time into US dollars, is reproduced below. The list excludes funds currently being placed by Probitas.

Rank
 

Fund Name
 

Target Size

Target

Currency

Target in
USD (MM)

1

GS Infrastructure Partners II

       7,500

USD

       7,500

2

Macquarie European Infrastructure Fund III

       5,000

EUR

       7,474

3

Alinda Infrastructure Fund II

       5,000

USD

       5,000

4

The Waste Resource Fund

       3,000

EUR

       4,484

5

RREEF Pan-European Infrastructure Fund II

       3,000

EUR

       4,484

6

KKR Infrastructure Fund

       4,000

USD

       4,000

7

Macquarie Infrastructure Partners II

       4,000

USD

       4,000

8

Energy Capital Partners II

       3,500

USD

       3,500

9

aAIM Infrastructure Fund

       2,000

GBP

       3,314

10

ArcLight Energy Partners Fund V

       3,000

USD

       3,000

11

Blackstone Infrastructure Fund

       3,000

USD

       3,000

12

CVC European Infrastructure Fund

       2,000

EUR

       2,990

13

Fortis Investment Successor Infrastructure Fund

       2,000

EUR

       2,990

14

Macquarie State Bank of India Infrastructure Fund

       2,000

USD

       2,000

15

LambdaStar Infrastructure Partners

       1,500

USD

       1,500

16

United States Power Fund IV

       1,500

USD

       1,500

17

Macquarie Everbright China Infrastructure Fund

       1,500

USD

       1,500

18

Macquarie Renaissance Infrastructure Fund

       1,500

USD

       1,500

19

Antin Infrastructure Fund

       1,000

EUR

       1,495

20

Cube Infrastructure Fund

       1,000

EUR

       1,495

21

InfraMed

       1,000

EUR

       1,495

22

Henderson Infrastructure III

          800

GBP

       1,326

23

Barclays Integrated Infrastructure Fund

          800

GBP

       1,326

24

Emerald Infrastructure Development Fund

          750

EUR

       1,121

25

Neuberger Global Infrastructure Partners

       1,000

USD

       1,000

26

Alterna Core Capital Asset Fund

       1,000

USD

       1,000

27

USRG Power and Biofuels Fund III

       1,000

USD

       1,000

28

CPG China Toll Road Fund

       1,000

USD

       1,000

29

IDFC India Infrastructure Fund

       1,000

USD

       1,000

30

India Infrastructure Advantage Fund

       1,000

USD

       1,000

31

JPMorgan AIRRO Fund

       1,000

USD

       1,000

32

Principle Europa Indian Infrastructure Fund

       1,000

USD

       1,000

33

ADCB Macquarie Infrastructure Fund

       1,000

USD

       1,000

34

EMP Energy Fund

       1,000

USD

       1,000

35

Saudi Infrastructure Fund

       1,000

USD

       1,000

36

Troika Infrastructure Fund

       1,000

USD

       1,000

37

InfraVia

          600

EUR

          897

38

Panda Global Energy & Renewable Fund

          800

USD

          800

39

SC-IL&FS Asia Infrastructure Growth Fund

          800

USD

          800

40

Latin Power IV

          800

USD

          800

41

EnCap Energy Infrastructure

          750

USD

          750

42

Asian Giants Infrastructure Fund

          750

USD

          750

43

WLR China Energy Infrastructure Fund

          750

USD

          750

44

Infrastructure Fund of Colombia

          750

USD

          750

45

HSBC Environtmental Infrastructure Fund

          500

EUR

          747

46

DIF Infrastructure Fund II

          500

EUR

          747

47

Fortman City Development Infrastructure Fund

       4,500

CNY

          660

48

Challenger Mitsui Emerging Markets Infrastructure Fund

          650

USD

          650

49

ADIC-UBS Infrastructure Fund

          600

USD

          600

50

Beehive Water & Waste Fund

          400

EUR

          598

51

Fortis Clean Energy Fund

          400

EUR

          598

52

Robo Bouwfonds Communication Infrastructure Fund

          375

EUR

          561

53

Rockland Power Partners

          500

USD

          500

54

Aviva European Renewable Energy

          500

USD

          500

55

China AME Energy Fund

          500

USD

          500

56

China and Pacific Rim Water Infrastructure Fund

          500

USD

          500

57

CIMB Islamic Infrastructure Fund

          500

USD

          500

58

Indochina Infrastructure Holdings

          500

USD

          500

59

Q India PE Fund

          500

USD

          500

60

African Energy Infrastructure Fund

          500

USD

          500

61

Manara Infrastructure Fund

          500

USD

          500

62

MENA Infrastructure Fund

          500

USD

          500

63

Mubadala Infrastructure Partners Fund

          500

USD

          500

64

Islamic Infrastructure Fund

          500

USD

          500

65

Dalmore Capital Fund

          300

GBP

          497

66

Foresight Environmental Infrastructure Fund

          300

GBP

          497

67

Plenary Investment Management

          500

AUD

          465

68

Axis India Fund

          400

USD

          400

69

MAP Clean Energy Fund

          400

USD

          400

70

Bunyah GCC Infrastructure Fund

          400

USD

          400

71

Brookfield Colombian Infrastructure Fund

          400

USD

          400

72

EUROFIDEME 2

          250

EUR

          374

73

European Renewable Energy Fund

          250

EUR

          374

74

Foresight Solar Fund 2

          250

EUR

          374

75

Public Infrastructure Partnership Fund

          500

NZD

          369

76

AmKonzen Asia Water Fund

          320

USD

          320

77

Water Property Investors

          300

USD

          300

78

Eredene Capital India Infrastructure Fund

          300

USD

          300

79

GCC Energy Fund

          300

USD

          300

80

Darby Colombia Transportation Fund

          300

USD

          300

81

Darby Latin America Mezzanine Fund II

          300

USD

          300

82

Leveraged Green Energy Fund

          250

USD

          250

83

Brookfield Americas Infrastructure Fund

          250

USD

          250

84

EstCapital Real Energy

          150

EUR

          224

85

Equitix Fund I

          125

GBP

          207

86

Alcazar Capital India Fund

          200

USD

          200

87

Piramal Healthcare Fund

          200

USD

          200

88

PSource China Infrastructure

          200

USD

          200

89

Aravis Energy I

          125

EUR

          187

90

Aleltho Renewable Energy Fund

          175

GPB

          175

91

Central American Mezzanine Infrastructure Fund

          150

USD

          150

92

ENERCAP I

          150

USD

          150

93

Foresight European Solar

          100

EUR

          149

94

Mekong Brahmaputra Clean Development Fund

          100

USD

          100

95

ND Infrastructure Fund I

          100

USD

          100

96

PTC India

 TBA

            –  

 TBA

97

SREI Infrastructure

 TBA

            –  

 TBA

98

VinaCapital

 TBA

            –  

 TBA

99

CITIC-Kazyna Investment Fund

 TBA

            –  

 TBA

Total:

   110,362

 Notes: 1 EUR = 1.49 USD; 1 GBP = 1.66 USD; 1 AUD = .93 USD; 1 NZD = .74 USD; 1 CNY = .15 USD 
 Figures current as of press time.
 Source: Probitas Partners