Investment managers operating in the US infrastructure market are in for a boon as growth in fundraising and interest in the asset class continue to trend upwards, Fitch Ratings stated in a report.
Interest in infrastructure assets, evident in record-breaking fundraising and investment amounts, could have a “meaningful positive impact” on the performance of alternative investment managers, the ratings agency said. Fitch predicted that management fee streams will remain broadly stable, though they may come under “modest pressure” if there is a lack of attractive investment opportunities.
“While alternative investment manager fund realisations remain relatively strong, dry powder in the industry continues to grow,” the report stated. However, Fitch noted that aggregate infrastructure deal value increased to $645 billion in 2016.
The ratings agency said uncertainty in other markets has shifted investor focus within real assets to infrastructure funds, which are an attractive choice for portfolio diversification, inflation hedge and stable returns.
Fitch said there is building momentum for infrastructure fundraising, with $63 billion of capital raised for unlisted vehicles in 2016 and $29 billion of capital raised in the first quarter of 2017. It cited Brookfield Asset Management's $14 billion fund closed in 2016, and Global Infrastructure Partners' record-breaking $15.8 billion vehicle reaching close in January.
New fundraising highs have been driven by increased interest from US pensions, the agency said; in May, for example, two pensions – Illinois Municipal Retirement Fund and Ohio Police and Fire Pension Fund – announced inaugural infrastructure commitments.
The ratings agency said infrastructure in the US is attracting attention from sovereign wealth funds as well, highlighted by Public Investment Fund of Saudi Arabia's $20 billion anchor investment in The Blackstone Group's new infrastructure vehicle.
Fitch said a lot of interest in the US market is being driven by the possibility of federal government spending from the Trump administration's infrastructure plan. A proposal has not been submitted so far, but plans seem likely to include $200 billion in federal spending and a focus on employing public-private partnerships on certain projects.