The infrastructure industry does not seem able to throw off the air of cautiousness that has gripped the private capital industry in Q2. Investors are generally looking to make fewer and smaller investments than they were 12 months ago, deal activity has been lacklustre for the past year, and fundraising has been heavily cyclical in recent quarters.
But the industry does seem to be somewhat insulated, and there are certainly positive signs. Lower fundraising is probably to be expected given the unprecedented activity that marked 2018, and there are still plenty of multibillion-dollar funds in market, which is a positive sign for future quarters. Deal numbers are down but values in Q2 are up, and activity is surging in some regions and sectors. On average, funds have returned over 13% to investors in the year to September 2018, higher than either real estate or private debt.
So where is the rest of the year likely to take the asset class? It is unlikely, but by no means impossible, that fundraising will match the record levels seen in 2018. Of particular note are the two largest funds in market from Brookfield and GIP – both are targeting $20bn, both have held an interim close, and neither are likely to remain on the road for too much longer. And while investors’ plans are generally more targeted than they were a year ago, overall appetite is still significant.
The biggest question mark lies over the deals market. Dry powder remains extremely high and has jumped past $200bn in the first half of the year. Investors may well be waiting to see some of this capital being put to use in the coming months before making further commitments. With so much capital available in the industry, the pressure is on fund managers to find regions and sectors that still offer good deal opportunities and the potential for substantial growth and revenue.
For further in-depth analysis on fundraising, deals, performance and investor data from the quarter, download the newly-released Preqin Quarterly Update: Infrastructure, Q2 2019.
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