‘Lower mid-market focus’ secures $600m for Ridgewood’s debut infra fund

The vehicle is already 45% invested and is targeting upper mid-teen returns from water assets and other 'essential' infrastructure.

Ridgewood Infrastructure has raised $600 million for the US firm’s debut asset class vehicle, after pitching to investors a lower mid-market strategy with a particular focus on the water sector.

Commitments from around 25 North American and European institutional investors to the Ridgewood Water and Strategic Infrastructure Fund surpassed the New York-based firm’s $500 million target.

Ross Posner, managing partner at Ridgewood, said the fundraise shows LPs want new types of exposure to the asset class. “The infrastructure market and investor base has matured. As investors have learned more about the industry, they are targeting allocations more specifically to complement their existing strategies,” he argued.

The Ridgewood fund is investing in what Posner called “essential” infrastructure, assets with long-term, high-quality and non-correlated cashflows that provide vital services to the surrounding community. The firm is expecting upper mid-teen gross returns from $50 million to $150 million investments into assets valued no higher than $500 million, Posner said.

“Many investors have laid a base with large global infrastructure managers and are now thinking about adding complementary investment strategies,” he explained. “A lower mid-market strategy has resonated with investors … because it’s a part of the market that’s opportunity rich and relatively capital short.”

Ridgewood has already committed 45 percent of the fund’s capital across four investments, including one that has not been announced but is due to close by the end of the month. The others include a natural gas distribution business called SiEnergy, a regulated water and wastewater business called Undine, and a 30-year contract to manage the 142-mile Vista Ridge Pipeline supplying 20 percent of San Antonio’s freshwater.

Posner said that Ridgewood does not have “prescribed thresholds” to commit capital to certain sectors but will focus on assets with “best relative value”. He added that the water sector in particular is one area the firm has built “specialisation and focus”.

“Many LPs are interested in better understanding water assets and deploying capital into that sector,” Posner said.

Ridgewood’s infrastructure business is part of the broader Ridgewood Companies, which also includes an energy investment division. The infrastructure and energy groups manage a combined $6 billion in capital and commitments.

Matthew Swanson founded Ridgewood Infrastructure and is also a senior managing director at the energy group. Before joining in 2014, Posner helped launch the infrastructure and real assets group at Allstate Investments. Michael Albrecht, a partner at Ridgewood Infrastructure, works alongside Posner after having also previously worked on Allstate Investments.