Traditionally, investors in the infrastructure asset class have predominantly focused their investment in the more developed markets of North America, Europe and Australasia. However, as the infrastructure asset class continues to mature and pricing, particularly in the most developed markets, becomes increasingly competitive, investors are searching further afield in a bid to uncover attractive investment opportunities. As investors familiarize themselves with the asset class, they are progressively deploying available resources and incorporating emerging market* investments into their portfolios. Preqin’s Infrastructure Online service features information on 80 closed infrastructure funds targeting investments in the BRIC nations, a subcategory of emerging markets, which have raised a combined $38bn. The platform also includes data on 16 funds currently in market; these funds are targeting an aggregate $8.9bn in investor commitments.
Of the 80 BRIC-focused funds to have reached a final close, 44% target investments with at least a partial focus on India, followed by Brazil (32%), China (30%) and Russia (5%), as shown in the chart above. Brazil is one of the few countries in the world that is self-sufficient in oil and rich in natural resources. As a result, 21 of the 26 closed infrastructure funds investing in Brazil target the energy and natural resources industry. China, on the other hand, remains a big importer of raw materials and commodities, with 11 of the 24 closed infrastructure funds focusing on sea ports and transportation.
According to Preqin data, there have been some notable successful fundraises so far this year, with large vehicles surpassing their targets. I Squared Capital closed ISQ Global Infrastructure Fund in April 2015 on $3bn, much larger than the initial $2bn target. The fund targets energy, transportation and utility industries on a global scale, with a partial focus on investing in China and India. Additionally, P2 Brasil closed its third vehicle in March 2015 on $1.67bn, slightly above its target of $1.6bn. The fund targets economic infrastructure such as energy, transportation, shipping and waste management in South America generally, but primarily in Brazil.
Turning to funds in market, the largest of the 16 vehicles currently raising capital is the IL&FS Infrastructure Debt Fund, a vehicle with a $2bn target size that will look to invest in several industries from transportation to healthcare, predominantly focusing on India. With 2015 already witnessing record levels of BRIC-focused infrastructure fundraising – $5.6bn has already been raised in 2015 YTD – as well as 16 vehicles currently raising capital focusing on the economic group, there remains significant interest in BRIC-focused infrastructure.
*Preqin’s emerging markets index consists of Argentina, Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Israel, Malaysia, Mexico, Morocco, Myanmar, Pakistan, Peru, Philippines, Poland, Romania, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey, and United Arab Emirates.