Renewables leads specialist fundraising charge

The biggest fund raised in Q1 is dedicated to the sector. And of the top five vehicles closed, only one is a generalist.

There are two sets of takeaways from our Q1 2021 unlisted fundraising report that are worth dwelling on – one less interesting, albeit catchy; the other more pertinent, but perhaps slightly less flashy.

Let’s get the less interesting stuff out of the way first, which is that just shy of $24 billion was raised by unlisted, closed-end funds in the first quarter of the year. Yes, this makes it the lowest Q1 tally since 2018, but we caution against reading too much into that slowdown just yet. Firstly, as you can see in our Q1 report, there are several marquee funds in market due to close this year, meaning 2021 may end up as a robust fundraising year, on a par with the two years preceding it. And secondly, because this is a non-mega-fund year, and the absence of a Brookfield Asset Management or Global Infrastructure Partners flagship is always keenly felt. That is very much evident when comparing this quarter with Q1 2020, where $45.5 billion was raised, $20 billion from Brookfield’s fourth flagship vehicle.

What is much more interesting to note, however, is the composition of the 13 funds that have reached a final close during the first quarter of the year. Of those, five vehicles – or about 38 percent of all funds closed – were specialist strategies. And of those five, four were focused exclusively on renewables. In fact, the largest fund closed in Q1 – BlackRock’s $4.8 billion Global Renewable Power Fund III – is a dedicated renewables strategy.

The plot thickens when you look at the top five funds closed in the quarter. Traditionally dominated by generalist vehicles, the list is made up almost entirely of specialist strategies. Only one vehicle – the $2.7 billion Basalt Infrastructure Partners III – has a generalist focus.

There’s also plenty of evidence to reinforce that this is no quarterly fad. For example, the strength of renewables fundraising so evident in Q1 has already got a boost from this week’s €7 billion final close of Copenhagen Infrastructure IV, billed as the world’s largest greenfield renewables vehicle. That will surely be the biggest renewables fund close of the year – and one of the largest closes full stop – but is very unlikely to be the last final close the sector sees in 2021.

Other trends in the top five show similar longevity. Take the $3.9 billion raised for KKR’s debut Asia-Pacific infrastructure fund, the biggest such vehicle in the region. As we exclusively reported, Stonepeak Infrastructure Partners is gearing up to target APAC with a dedicated $3 billion fund. A source familiar with the fundraise summarised the Stonepeak vehicle’s raison d’être neatly: “Everybody is interested in Asia at the moment.”

There’s also well-known momentum behind digital infrastructure. That’s evident in another top-five close, IPI Partners’ second data-centre fund, which closed on $3.8 billion but was originally targeting $1.5 billion. Leaving aside the infra versus real estate data centre management debate for a moment, the digital sector as a whole is likely to see significant capital this year, led by Digital Colony’s second fund, which has already raised over $4 billion on its way to a $6 billion target.

Of course, the biggest fund closes this year are likely to be held by generalist-focused vehicles, spearheaded by the likes of EQT and Stonepeak, with the largest number of funds closed also following this strategy.

But that in no way negates the trend we are seeing in Q1: that specialist strategies are very much here to stay and able to raise increasingly large sums of capital.