In our January 2010 Preqin Infrastructure Spotlight we predicted that 2010 was likely to be a defining year for the infrastructure asset class. The effects of the global financial crisis in 2009 and lack of investor activity bought an end to a sustained period of growth within the industry, which raised questions about its future. However, based on the characteristics of the asset class and investor plans for investment over the course of the year it seemed likely that the market would rebound. This has certainly been the case.
In 2010 to date, 22 unlisted infrastructure funds closed raising an aggregate $26.7bn. This is significantly higher than the 17 funds closed in 2009 which attracted just $7.7bn in total capital commitments. This figure is also not far off the $34.9bn raised in pre-crisis 2008. This shows that investor confidence clearly returned to the infrastructure asset class in 2010, with several sizeable fund closures including the $4.3bn Energy Capital Partners II and the $4.1bn Alinda Infrastructure Fund II. This correlates with our October 2009 investor survey which predicted that many investors would resume making fund commitments in 2010.
Deal flow has remained restricted in 2010 due to the lack of available long-term debt financing and high asset valuations. However, over 180 transactions have successfully been completed by unlisted infrastructure fund managers in 2010 to date, a figure that is almost certain to rise as information on further transactions becomes available with time. Deals such as the €7.9bn purchase of the SEA High Speed Railway Line in France by a consortium including AXA Infrastructure Activities, CDC Infrastructure and Vinci Concessions, shows that sizeable transactions are still possible in the current market environment. As a result, the total deal volume for 2010 should not be far off the 216 deals finalised in 2009.
Investor appetite for infrastructure funds will continue to grow as suggested by our June 2011 investor survey. 70% of surveyed investors plan to make further infrastructure fund commitments in the coming 12 months, up from 40% that stated the same in October 2009. Many of these investors plan to make multiple fund commitments. Therefore the outlook for the industry looks positive as it continues to gain momentum following the financial crisis. Although, the nature of the asset class in the future will be determined by the resolution of several ongoing issues such as fee models and fund structures.
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