The rise of secondaries in infra investing

The market is primed for further growth, despite some scepticism over managers’ ability to secure quality assets at a discount.

With the global economy still recovering from the unprecedented shock brought by covid-19 and the infrastructure investing market steadily growing in both size and sophistication, conditions seem ideal for a boom in the infrastructure secondaries market.

Blackstone Strategic Partners demonstrated investor appetite with a $3.75 billion final close on its infrastructure secondaries fund in July 2020, the largest pool ever raised for an infrastructure secondaries strategy. Major fundraising successes have continued this year, with Landmark Partners announcing a final close on its $915 million infra secondaries fund in May. William Greene, head of infrastructure at Stafford Capital Partners, which reached a third close of €450 million in July, says his firm’s secondaries strategy “has resonated strongly with investors looking to access quality assets at a value not readily achievable in the direct market”.

It should come as no surprise, therefore, that major players in the infrastructure space are lining up to join the secondaries rush.

In April, we broke the news that Macquarie Infrastructure and Real Assets is building a secondaries investment team with a series of big-name hires. As well as targeting LP portfolios, Macquarie will also focus on GP-led deals, capitalising on the desire of GPs to keep hold of strongly performing assets.

Big deals

Of the 20 largest alternatives continuation fund deals to date, four are in the infra space, according to research published in June by affiliate title Secondaries Investor

Global Infrastructure Partners

Fund name: Global Infrastructure Partners I
Fund size: £3 billion Year of transaction: 2019
About the deal: GIP sold a 50.01 percent stake in Gatwick Airport to VINCI airports and rolled the remainder into a continuation vehicle. It is the largest single-asset secondaries transaction ever.

Blackstone Tac Opps

Fund name: Tactical Opportunities Fund
Fund size: $1.4 billion Year of transaction: 2019
About the deal: Blackstone extracted wireless infra operator Phoenix Tower International into a continuation fund.

Corsair Infrastructure Partners

Fund name: Gateway Infrastructure Investments (and other shareholders)
Fund size: $1.8 billion Year of transaction: 2018
About the deal: CIP lifts three assets – Vantage Airport Group, DP World Australia and Spanish toll road operator Intínere Infraestructuras – from its 2007 vintage infra fund into separate continuation vehicles.

Oaktree Capital Management

Fund name: Highstar Capital Fund III
Fund size: $1.3 billion Year of transaction: 2019
About the deal: Ports America, the sole remaining asset in Oaktree’s 2017 vintage infra fund, is moved into a continuation vehicle. New buyers bring $650 million into the business and existing LPs in Highstar III another $650 million.

GP-led deals have increasingly involved just a single asset. Global Infrastructure Partners sold a 50.01 percent stake in London’s Gatwick Airport for £2.9 billion ($4.1 billion; €3.4 billion) in 2019 but rolled its remaining holding into a continuation vehicle – the largest ever single-asset continuation fund deal. The pandemic further encouraged the growth of a single-asset strategy, given that it became easier for buyers to conduct due diligence and assign a valuation on one asset than on a diversified portfolio.

Inevitable rise for secondaries?

But not all observers agree that a secondaries strategy is a safe bet for infrastructure investors. Marvin de Jong, director for private markets at Kempen Capital Management, predicted last October that “the performance of secondaries funds currently being raised will ultimately disappoint, especially given investors’ high expectations”. He told us the situation was not comparable with the period following the 2008-09 global financial crisis, when it was possible to pick up bargains through the secondaries market. “Significant discounts are only available for unpopular funds, such as those with a sectoral focus on energy.”

Nevertheless, the secondaries market for infrastructure has plenty of room to grow. The infrastructure and real estate sectors accounted for just 5 percent of the overall secondaries market in 2020, according to investment bank Greenhill. Yet almost 50 percent of secondaries buyers expressed an appetite for infrastructure in a survey conducted in 2020 by advisory firm Evercore.

Vittorio Lacagnina, Partners Group’s head of business development, private infrastructure, told us in February that the market had been growing at around 13 percent CAGR over the previous five years and was set to continue expanding. “The main driver is the substantial pick-up in infrastructure primary fundraising,” he pointed out, adding that this “will result in a larger secondaries supply with around a three- to five-year lag.”

Infra secondaries in 2021


Stafford clocks double-digit discount as it holds interim close
The firm signed the first transaction from its Stafford Infrastructure Secondaries Fund IV at a 14 percent implied discount. SISF IV’s first deal was in the fibre sector. The fund will target core infra investments via secondaries in Europe, the US and Australia.


Macquarie hires ex-Strategic Partners exec to lead secondaries launch
The manager is building a secondaries investment team, having hired Wandy Hoh as managing director in charge of the unit. Bryan Beach also joined from Newbury Partners as vice-president. The team will initially be based in New York and target LP portfolios and GP-led deals.


Landmark closes first infra secondaries fund on $915m
The firm wrapped up fundraising on its debut infra secondaries vehicle, Landmark Infrastructure Partners II, which has made six investments accounting for 51 percent of committed capital. Among the LPs in the fund are North Carolina State Treasury. Fund II invests across the utilities, transportation, communications, renewables and energy infrastructure sectors.

Brookfield eyes late 2021 for infra secondaries fund launch
The firm will primarily focus on GP-led and other structured transactions, with opportunistic investments in LP deals. The business will be launched in North America and Europe, with an eye towards global coverage. That platform will sit inside the broader infrastructure and renewables business: Brookfield Infrastructure Group, which has $91 billion of assets under management.