More than a year after private equity firm CVC Capital Partners launched its first infrastructure fund, it has yet to reach a close in its fundraising, two sources close to the process said.
The Luxembourg-headquartered buyout firm launched its debut US$2bn infrastructure fund in September 2008 but has not secured enough commitments to date for a close in what is a challenging fundraising environment, sources said.
One of the sources said the fund’s existing commitments were very far from its target while the second source said CVC was still working toward a close and was engaged in advanced discussions with “key investors”.
CVC did not respond to a request for comment.
Asset managers have piled into the infrastructure asset class in the last three years, but in the aftermath of the financing downturn they have come across sceptical institutional investors with a tight budget and high expectations.
Private equity players in particular have struggled to reconcile their traditional fees model with what many established investors in infrastructure consider as reasonable remuneration for running an infrastructure fund.
Another hurdle that new entrants to the infrastructure market like CVC face is establishing relationships with institutional investors to ensure a top spot in their list of allocations.
Rivals Kohlberg Kravis & Roberts and Blackstone, which are also in the process of fundraising for multibillion dollar infrastructure funds, have for this reason poached veterans of the infrastructure investment world to spearhead their efforts.
CVC’s infrastructure fund is led by Stephen Vineburg, who previously led the infrastructure investment team at Colonial First State Global Asset Management, the investment arm of Commonwealth Bank of Australia.
The fund has a returns target of 12 to 15%, one of the sources said. It has been attempting to line up a pipeline of infrastructure investments in Europe, including Gas Natural’s gas distribution assets in Madrid