I Squared closes second fund on $7bn amid soaring US interest

The fund manager attracted more than double the number of LPs that had invested in its debut vehicle, while Fund II had a re-up rate of more than 80%.

I Squared Capital has closed its second fund on $7 billion and has already committed nearly a quarter of the investment vehicle to infrastructure assets across four continents.

The final close comes 16 months after the New York-based firm launched ISQ Global Infrastructure Fund II. I Squared beat its initial target of $5 billion, collecting commitments from more than 100 institutional investors in North America, Europe, Asia, Australia and elsewhere, Adil Rahmathulla, the firm’s founding partner, told Infrastructure Investor.

Among the markets I Squared saw more interest from limited partners was in the US, he said. “That’s still a continuing trend within the industry, where US investors are getting much more comfortable investing in the infrastructure asset class. It’s proving it has resilient characteristics, both in terms of returns as well as income generation,” Rahmathulla said.

US investors that have committed to I Squared’s second fund include the North Dakota State Investment Board, which approved $140 million to the vehicle; $250 million from the Washington State Investment Board; and $150 million from the Texas Municipal Retirement System.

Asia was another market from which I Squared saw greater interest, Rahmathulla added.

I Squared will hold investments it makes with Fund II between five and seven years. Having already made four investments, Fund II’s investment period is now just under four years, according to Rahmathulla.

The firm will keep the same investment strategy it held for Fund I, which is to invest in mid-market operating assets in the energy, transportation, utilities and telecom sectors, mostly in OECD markets. Around a third of the fund can invest in non-OECD countries.

With 24 percent deployed already, I Squared has made four investments from Fund II. Those deals include a full acquisition of TIP Trailer Services, a European and Canadian trailer leasing and services company; 344MW of power-generation assets in nine countries across Latin America; Hong Kong-based fibre internet company HGC Global Communications; and US-based Pinnacle Midstream.

I Squared’s first infrastructure fund closed on $3 billion in April 2015, drawing more than 45 investors from around the world. The firm has more than $13 billion in assets under management.