Stonepeak closes year’s largest fund on $7.2bn

The firm has already started investing capital from Fund III, after bumping up its hard-cap to accommodate last-minute commitments.

Stonepeak Infrastructure Partners has concluded the largest infrastructure fundraising so far this year on $7.2 billion, after bumping the hard-cap for its third fund by $200 million to cater for last-minute commitments, sources familiar with the matter confirmed to Infrastructure Investor.

Around 100 investors committed to the fund, which is targeting a 12 percent net internal rate of return, inclusive of a 4 percent cash yield, on investments in North American power, water, energy, communications and transportation assets, according to public pension documents.

Stonepeak offered a 15 percent carry for first-close investors (versus 20 percent) on an 8 percent hurdle rate. The firm also offered a discounted management fee of 1.375 percent (compared with 1.5 percent) based on aggregate commitments from TorreyCove clients, according to the documents. The manager is committing 1 percent of the aggregate fund commitments.

Fund III more than doubles Fund II’s final close of $3.5 billion, held in January 2016. Like Fund II, the firm will use its newest vehicle to target deal opportunities between $100 million and $1 billion.

Stonepeak has already begun investing Fund III, including $500 million committed to an undisclosed, US-based transportation company and the forming of a midstream joint-venture with Targa Resources Corporation.

Founded in 2011 by former Blackstone executives, Stonepeak closed its inaugural infrastructure fund in 2013 on $1.65 billion. According to documents from the New Jersey State Investment Council, that fund was generating a 14.3 percent net IRR and a 1.41 times money multiple, with 41 percent net debt to total capitalisation as of March 2017.

The firm announced in June it is opening an office in Austin, Texas later this year.

A final close of $7.2 billion places Stonepeak among the largest fund managers in the industry. Investors are increasingly seeking exposure to infrastructure for the asset class’s perceived steady returns and protection from inflation. As capital has flowed in, the size of investment vehicles has swelled.

In the first half of 2018, unlisted, closed-ended infrastructure funds have put in their second-best performance since 2012, according to preliminary data from Infrastructure Investor, which shows $36.82 billion has been raised.

Brookfield Infrastructure and Global Infrastructure Partners currently manage the industry’s largest unlisted vehicles, having raised $14 billion and $15.8 billion, respectively, for their third vehicles. The next tier of fund managers includes the likes of Stonepeak; KKR, which is nearing a $7 billion final close for its own third infrastructure fund; and I Squared Capital, which is raising a $6.5 billion sophomore vehicle.