Alinda closes $4B fund in tough environment

Alinda Capital Partners has closed its second infrastructure fund well above its target as scores of other private equity firms, similarly targeting investments in airports, toll roads and utilities, are struggling to get their fund raised.

The New York-based firm closed the fund at $4 billion, above its $3 billion target.

Limited partners include the Alaska Permanent Fund Corp. (which committed $250 million), Washington State Investment Board ($400 million), California Public Employees’ Retirement System ($300 million), Oregon Public Employees Retirement Fund ($200 million) and the Kentucky Teachers’ Retirement System.

The firm claims to be the largest fund manager nationwide of pension assets for infrastructure investments, and the second largest worldwide. Alinda Capital raised $3 billion for its debut fund, which closed in 2007.

Alinda Capital’s success can be traced in part to timing. Infrastructure was just gaining in popularity when it raised its first fund. Soon after, The Carlyle Group closed a $1.15 billion infrastructure fund.

Alinda’s portfolio includes BAA Ltd., an operator of seven airports in the United Kingdom and Italy, including Heathrow Airport in London; American Roads, which owns and operates five roads and road concessions, including a border crossing tunnel between Detroit and Windsor, Ontario; and South Staffordshire Water plc, a water utility in the British Midlands.

Although it typically takes longer to sell infrastructure investments, Alinda Capital has already logged some partial realizations. BAA, for example, sold off the interests in its Australian airports in 2007 and sold London’s Gatwick Airport in 2009. Another portfolio company, SourceGas, sold its Mexican gas utility subsidiary in 2009.

Alinda Capital’s fund-raising success comes as many other infrastructure firms are having trouble raising funds, in part because illiquid investments have fallen out of favor with investors during the economic meltdown.

Infrastructure firms raised only $10.7 billion in 2009—a 57% drop from the $24.7 billion raised in 2008, and nearly 70% less than the $34.3 million raised in 2007, according to placement agency Probitas Partners. Twenty-five infrastructure funds either abandoned or delayed fund-raising in the 18 months ended June 30, according to trade magazine Pension & Investments.

Among those experiencing setbacks is Kohlberg Kravis Roberts & Co., which reportedly started out seeking as much as $10 billion for its first infrastructure fund in March 2008. The firm is now seeking $2.5 billion, according to Preqin.

Meanwhile, The Blackstone Group has reportedly struggled for more than a year to raise between $2 billion and $3 billion for its first infrastructure fund. —Bernard Vaughan