Sofos targets $100m first close for green infra fund by year-end – exclusive

Sofos is aiming to hold a $50 million first close on its sophomore vehicle by July, Infrastructure Investor has learned.

Chief investment officer Timothy Teo told Infrastructure Investor that the Singapore-based fund manager was seeing interest from US institutions. However, he added that Sofos had enlisted the help of China’s Ping An Securities to secure anchor investments from family offices and institutions based in Hong Kong and on the Chinese mainland.

Teo said the Sofos Singapore Greentech Asia Infrastructure Fund, which was launched in 2018, aims to raise $100 million by the end of 2019.

The fund will invest in water management, waste-to-energy and renewable projects in South-East Asia region. “Several countries of South-East Asia, like Indonesia, suffer from water scarcity,” said Teo. “This can be a good opportunity to fund water management projects.”

The fund will have a lifespan of five years, with the option of extending this by an additional two. Teo said it was targeting IRRs of between 20 and 25 percent.

Sofos is aiming to partner banking institutions to deploy up to $350 million in three to five deals with ticket sizes of between $50 million and $100 million.

The firm is raising its latest vehicle as it prepares to deploy capital from its debut infrastructure fund, which closed at $100 million in 2017. Sofos said that the first investments from its debut fund would be in the south of Vietnam, but declined to provide further details.

Asked how the company plans to find bankable projects in South-East Asia, Teo said Sofos has developed “a strong network on the ground” that will provide “upcoming opportunities,” mainly in greenfield projects. “We know the right players in the market, and those who are looking for funding,” he said.

Johnson Tang, chairman of the infrastructure investment team at the firm, said the renewables sector was not a “top priority”.

“We will analyse the projects that our partners bring to the table, and whether the PPAs supporting them are bankable,” he said.

Teo stressed that the firm’s investments would have a strong ESG component: “We look for projects that are economically viable, but that also have a social component and that make life better for the people living in the region.”

As for competing with global investment funds that are starting to move into the region, Tang pointed out that these GPs tend not to target the market segment that Sofos focuses on.

“The ‘big boys’ generally do bigger projects, while we focus on deals in the $50 million to $100 million segment, that requirs having several local connections,” Tang said. “Returns are higher, but you need to make more of an effort.”

Founded as an investment advisory firm in 2008, Sofos became an investment manager in 2013. It initially focused on boutique investments in real estate mezzanine debt in Germany, before deciding to raise its first infrastructure fund in 2017.