In Q3 2012, six unlisted infrastructure funds reached a final close having raised an aggregate $2.7bn in capital commitments. This represents a 48% decrease from the amount raised in Q2 2012, when 11 funds closed on an aggregate $5.2bn. The largest unlisted infrastructure fund to close in Q3 2012 was the $1.8bn EnCap Flatrock Midstream Fund II, which closed in July and seeks to invest in a portfolio of North American midstream natural gas assets. Despite only a small number of final closes, a further 10 funds held an interim close in Q3 2012, raising a sizeable $14bn towards their overall fundraising targets. EQT Infrastructure II is one example, which held a €1.1bn first close in July.
The capital raised by funds holding interim closes in Q3 is encouraging; however, the limited number of funds reaching a final close is indicative of the tough fundraising conditions faced by fund managers in the current market. Just 27% of unlisted infrastructure funds closed in the past year took less than 12 months to complete the fundraising process. In contrast, a significant 59% of funds closed during this period spent over 18 months on the fundraising trail, with 38% taking over two years to reach a final close. The extended length of time it is taking fund managers to close funds is a strong reflection of the post-crisis fundraising environment.
The 10 largest unlisted infrastructure funds to close between Q3 2011 and Q3 2012 accounted for 74% of the total capital raised during the period, with the three largest funds, the $3.3bn ArcLight Energy Partners Fund V, the $2bn Highstar Capital Fund IV and the $1.8bn EnCap Flatrock Midstream Fund II, making up 36% of the total between them. In terms of geography, nine of the 10 largest funds closed are primarily focused on the developed North American and European markets.
Global Infrastructure Partners II remained in market at the turn of Q4 2012, but reached a $8.25bn final close on 2 October 2012, becoming the largest unlisted infrastructure fund to reach a final close since the asset class’s inception. This significantly increased the total capital raised by unlisted infrastructure funds in 2012 YTD to $18.6bn, although the general fundraising outlook for the coming 12 months has not changed, with investors remaining cautious when making new fund commitments.