The current infrastructure fundraising environment remains a challenging one, with fund managers finding it difficult to stand out in a heavily congested market. Despite this, unlisted infrastructure fund managers are still successfully attracting fresh capital from institutional investors and holding increased numbers of final and interim closes as we move into H2 2012.
According to Preqin data, six unlisted infrastructure funds held a final close in Q2 2012, having raised an aggregate $2.7bn in total capital commitments. The largest infrastructure fund to close was KKR Infrastructure Fund, which held a final close in May on $1.044bn. The fund is KKR’s maiden infrastructure vehicle and has a global investment mandate but with a primary focus on the US and Europe. It seeks equity positions in brownfield economic and social assets with the scope to examine greenfield opportunities should the right investment arise. Other prominent funds to close in Q2 2012 included the €400mn AMP Capital Infrastructure Debt Fund and the £333mn Equitix Fund II.
Although just six infrastructure funds reached a final close in Q2 2012, a further 17 vehicles successfully held an interim close during the period, raising a combined $10.5bn towards their overall fundraising targets. This considerable increase on the $3.1bn raised by funds holding an interim close in Q1 2012 shows that institutional appetite for unlisted infrastructure funds remains strong. Many of these funds are still relatively new to the market and are expected to be on the fundraising trail for some time, holding several more interim closes before reaching a final close.
As the fundraising process is generally more prolonged in the post-crisis marketplace, an analysis of the length of time infrastructure funds are spending on the road in the current environment proves interesting. Of the 27 unlisted infrastructure funds to reach a final close over the past 12 months, 35% spent less than a year fundraising, with 10% managing to reach a final close in less than six months. Although this is quite positive, a significant 65% of funds to close over the past 12 months spent over a year on the fundraising trail, with 30% taking more than two years to close. Sixty-one percent of these funds failed to reach their pre-determined fundraising goals, and 21% failed to garner half of their targeted level of commitments. These statistics reveal a significantly challenging current fundraising market for infrastructure fund managers.
However, there are several trends which suggest that the market may be slowly recovering in certain areas. European fundraising in H1 2012 accounted for a greater proportion of aggregate capital commitments than North American funds for the first time since 2009. Emerging market-focused infrastructure funds are also attracting more commitments than in previous years, with 23% of capital raised over the past 12 months being raised by fund managers focused on such opportunities. This suggests that despite tough fundraising conditions in general, certain areas of the market are picking up.