Infrastructure fundraising taken to the next level

The global infrastructure market was boosted by almost US$10bn this month when two private equity funds targeting the sector – one set up by Credit Suisse, the other by Morgan Stanley, closed.

The largest of the two was Global Infrastructure Partners (GIP), a New York-based firm set up Credit Suisse and US conglomerate General Electric which raised US$5.64bn for its first fund. It has already invested in London City Airport, as well as port assets in the United Kingdom and Argentina, and a liquid petroleum product storage facility in India. Most recently it was part of the consortium behind Biffa, the UK waste infrastructure business it acquired in a £1.7bn alongside Montagu Private Equity.

The second fund raised was Morgan Stanley Infrastructure Partners, which closed on US$4bn, smashing its target of US$2.5bn. The money raised by the investment banking giant was raised from investors in North America, Europe, Australia, the Middle East and Asia, and includes major pension funds, insurance companies, high net worth individuals as well as Morgan Stanley and its employees.

James Gorman, co-president of Morgan Stanley, said: “Infrastructure is now an important component of any asset allocation strategy; it offers portfolio diversification and the ability to invest in ‘real’ assets, with uncorrelated investment returns relative to other asset classes.”

It is a sector which is becoming increasingly popular with investors seeking stability for their money. Researchers Private Equity Intelligence estimates that €19bn was invested into infrastructure funds in 2007, almost double the amount raised in 2006. Globally, 48 infrastructure funds are looking to raise a further €31bn. EVCJ’s sister publication Project Finance International puts the figures higher, saying that over the past 15 months 72 new infrastructure funds have been launched, and these are looking to raise more than €80bn.

Whatever the true figure, infrastructure fund managers are supremely confident for the propects of their asset class. In a recent feature article on infrastructure in the March issue of EVCJ, Queen, managing partner and head of infrastructure investment at 3i, said: “I think that in 10 years time infrastructure will be a bigger asset class than private equity.”

“To date, we have investments that exceed US$1bn in enterprise value that have achieved higher than expected returns,” said Sadek Wahba, chief investment officer and global head of Morgan Stanley Infrastructure. “The current challenging market conditions are creating unique opportunities in the infrastructure sector, and we are benefitting from our global footprint that is generating a strong pipeline across the Americas, Europe and Asia.”