“A man, a plan, a canal – Panama!” This sentence, lyrical enough to serve as a political motto or a pompous infrastructure programme, is in fact famous for something else: it is a palindrome, meaning it can be read both ways (forward and backward).
In essence, the same is true of our latest half-year fundraising figures, a full analysis of which will be released at the end of this month. According to our data, H1 2017 is the strongest half-year on record, with $36.16 billion raised for unlisted infrastructure. The total beats the previous peak, H1 2015’s $26.17 billion, by a wide margin. Yet take out the $15.8 billion amassed by Global Infrastructure Partners’ third fund and the amount raised over the period shrinks to $20.36 billion – the worst result since the $16.94 billion collected during the first half of 2012.
Should the industry be concerned? The totals could indicate a worrying bifurcation of the market, with a minority of successful managers raising ever bigger funds while others quietly drop off the radar. It could convey LP frustration with the difficulty to access said funds, leading some to abandon the field. Or it may imply that investors, taking note of rising fund sizes, asset prices and manager fees, are fearing a bubble and backing away from it.
We don’t think any of this is really true. Firstly, because concerns over falling fundraising volumes are not new, and not necessarily justified. It’s only natural, after all, that totals should be diminished when omitting the biggest item on the list. Take out the $12.58 billion close of Borealis’ Global Strategic Investment Alliance from H2 2014’s $35.54 billion, for instance, and the numbers don’t look all that bombastic any more. The same would apply to H2 2016, buoyed by Brookfield Infrastructure III’s $14 billion close.
More worthy of note is that on a yearly basis, since 2013, totals have been mostly flat, falling within a $7 billion range under $60 billion. The same can’t be said of other real assets categories: real estate, which grew from $61.3 billion to $147 billion between 2010 and 2015 but fell to $114 billion last year, has shown more volatility.
A second caveat lies in how the industry reports on its achievements. Real-time fundraising being an inevitably non-transparent process, its results can only be measured when closes are held. But a few of our readers, who circle the earth several times a year to visit LPs, will know that fundraising spreads over months or years. H1 stats do not account for money currently being collected for H2 or 2018 funds. Drawing conclusions purely based on numbers can be misleading; market insights and a perspective on what’s coming are needed to colour findings.
We were lucky enough to receive a good helping of both last week, when speaking to a handful of managers on a short trip to Paris. Few expect infra fundraising to stall soon. A sense of optimism seems to be permeating the French market, a view that extends to the wider European market, which many Paris-based firms also target. A manager told us it is set to deploy its latest fund in two years instead of three, and planning to raise 50 percent more for its next opus than the last time around. Others are nearing thresholds that would normally trigger efforts to market new vehicles.
The rest of the world is not feeling left out: the last 10 days alone brought us news of a very fast first-and-final close for iCON; the $1.65 billion close of BlackRock's second Global Renewable Power Fund; a first milestone for I Squared, with advisors telling us it will likely beat its $5 billion target; and remarks by ADIA suggesting emerging markets may be in for a swell in interest as well. And of course, that’s all before factoring in Blackstone’s hypothetic $40 billion vehicle, the close of which would be enough to push fundraising volumes to a fresh half-yearly record.
When that happens, “Are we not drawn onward to new era?” will be an easier question to answer. Until then, it remains first and foremost another good palindrome.
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