Sharp Rise in Infrastructure Inflows, and Asset Managers Notice

(July 3, 2013) -- Unlisted infrastructure funds raised 77% more capital during the first half of 2013 than the same period last year, according to Preqin data.

That is a $5.9 billion dollar increase year-on-year, from $8.2 billion to $14.5 billion.

In May 2013, Macquarie European Infrastructure Fund IV was the largest vehicle to reach a final close, raising $3.56 billion in investor capital.

A total of 10 infrastructure funds also reached an interim close during the second quarter of 2013, raising an aggregate $2.4 billion. There are now 144 unlisted infrastructure funds in the market, together targeting $93 billion in investor capital.

Major asset managers are on board, too. 

JP Morgan Asset Management has added seven new infrastructure specialists to its global real assets team in the last seven months alone, culminating July 3 with a new CIO. Matt LeBlanc, formerly a private equity energy specialist ArcLight Capital Partners, will be responsible for the firm's OECD infrastructure equity platform, worth roughly $8 billion.

 In a recent paper, the asset management firm predicted portfolio allocations to real assets—particularly infrastructure—could rise from the 5% to 10% average today to 25% in the next decade, as institutional investors search for growth in less-explored assets. In light of the research, the firm said it plans to make "significant" investments of its own in infrastructure.

Japan's Pension Fund Association recently joined the growing infrastructure investment trend when it took a stake in a US gas-fired power plant—Michigan's Midland Cogeneration Venture. The pension fund also plans to spend $1.25 billion on 10 overseas infrastructure projects such as pipelines and harbors, CIO Daisuke Hamaguchi, said this week, the Wall Street Journal reported.

More institutional investors will be following Hamaguchi's model, according to Elliot Bradbrook, Preqin's infrastructure data manager.

"There is still substantial investor appetite for the asset class, and this will likely drive further fundraising success in 2013 for fund managers that can demonstrate a consistent track record and investment strategy," Bradbrook said.