Historically, infrastructure funds focused on emerging markets have not attracted the same level of capital commitments as funds focused on the European and North American economies. The absence of developed infrastructure and the relative inexperience of fund managers in these regions has led investors to favour the more stable and predictable western markets.
However, the high risk/high return characteristic of emerging market opportunities remains an attractive investment option, both for fund managers and investors. Fund managers are aiming to satisfy the huge demand for infrastructure development in these regions and capitalise on the potential for lucrative returns. Investors on the other hand, are determined to achieve both geographic and strategic diversity within their investment portfolios following the economic crisis.
The recent $859mn closure of JPMorgan Asian Infrastructure & Related Resources Opportunity Fund, shows good momentum in the market. Although the fund closed below its intended $1bn target, the closure shows the current level of investor appetite for emerging market vehicles. The fund will invest in a range of greenfield and brownfield infrastructure opportunities throughout Asia but with a particular focus on China and India. The fund attracted commitments from several large pension plans including $30mn from Arizona Public Safety Personnel Retirement System and $37mn from Dallas Police & Fire Pension System.
There are currently 55 Asia and Rest of World focused funds in market targeting $27.9bn in total capital commitments. This represents 49% of the total number of funds on the road and 28% of the total capital being sought by fund managers.
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