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The Importance of Infrastructure Fund Manager Experience and Fund Size – April 2014

by Julia Goodall

  • 29 Apr 2014
  • INF

Over the past few years, the infrastructure asset class has seen a greater amount of capital being raised by increasingly fewer fund managers, indicating the growing importance of manager experience to investors looking to access the space. Preqin Investor Outlook: Infrastructure H1 2014, which assesses investor attitudes towards the infrastructure asset class, showed that GP experience is the most important factor that investors consider when looking to select an infrastructure fund manager in the current market. Eighty percent of respondents highlighted fund manager experience as a key factor when making fresh fund commitments, while past performance also featured significantly, with 48% of respondents selecting this as an important consideration.

Over 60% of aggregate capital raised for unlisted infrastructure in 2011 and 2013 was committed to funds managed by experienced firms with at least two previous funds closed, rising to 84% in Q1 2014. This reinforces the notion that institutional investors are placing increased emphasis on fund manager experience, with these managers representing a significant proportion of total capital raised in recent years. This also increases the concern for first-time fund managers; many of these firms are likely to spend longer on the road and secure less capital than their more experienced and well-established counterparts. Twenty-five unlisted infrastructure funds managed by first-time managers reached a final close in 2013 securing an aggregate $7.8bn. These funds represented 44% of the 57 funds closed during the year, but just 19% of the total $40.6bn raised.

With the majority of investor capital flowing into funds raised by more experienced managers, these firms have subsequently begun raising much larger funds in recent years as a result of increased investor demand. A substantial 71% ($29bn) of aggregate capital raised in 2013 was invested in funds which closed on $1bn or more, while just 2% ($800mn) was invested in funds closing on less than $100mn. So far in 2014, the proportion of capital raised by funds closing with at least $1bn in total capital is 83%.

In October 2012, Global Infrastructure Partners closed the largest infrastructure fund ever raised, the $8.3bn Global Infrastructure Partners II, the firm’s second offering. This vehicle alone accounted for a significant 28% of the $30bn raised throughout the whole of 2012. This trend continued in 2013 when Brookfield Infrastructure Fund II and EIG Energy Fund XVI, both managed by experienced firms, reached a final close raising $7bn and $6bn respectively, 32% of the $41bn raised during the year. The $5.1bn closing of Energy Capital Partners III in March 2014, 46% over its original $3.5bn target, suggests that this trend is continuing in 2014.

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