The North American infrastructure market is a leading area of institutional investor activity. Demand for infrastructure development and re-development in both the US and Canada has grown significantly over the past decade, leading to a growing number of North America-focused funds coming to market and an increasing number of investors carving out infrastructure-specific allocations.
Despite this, state governments in the US have traditionally been restrictive in encouraging private investment in public infrastructure assets. As such, there is an underdeveloped PPP/P3 market in the US, which has limited the number of deals being made compared to other developed markets such as Europe. Despite this, it is likely that this market will grow in the future as regulations are relaxed to allow for greater private sector investment to address the ever widening US infrastructure funding deficit.
According to Preqin data, 86 infrastructure funds primarily focused on North America have entered the market since the mid-1990s, the earliest being the 1996 vintage Energy Spectrum Partners. 57 of these funds have reached a final close raising an aggregate $55.5bn. In 2011 to date, nine North America-focused funds have closed raising a combined $8.5bn, 56% of the total capital raised by infrastructure funds globally so far this year.
North American funds in market are significant both in terms of number and aggregate target, with 29 funds currently on the road seeking $28.4bn. The average North American vehicle has a target size of $980mn, considerably higher than the $688mn average for European funds and the $465mn average for funds investing in Asia. Therefore, despite being a less prominent market than Europe, North American infrastructure funds continue to seek and attract significant levels of investor capital.
In total, 451 deals have been made by unlisted infrastructure fund managers in North American infrastructure assets since 1997. The figure increased steadily from 24 completed transactions in 2004 to 78 completed deals in 2007, emulating the growth in the fundraising market during the same period. This growth fell away from 2008 due to the impact of the financial crisis, although the number of deals made by fund managers improved slightly in 2010 as the debt markets began to recover. In 2011 to date, 38 deals have been completed by unlisted infrastructure fund managers in North American assets.
In terms of industry, 98% of North American deals have been completed in the core infrastructure sectors of energy, telecommunication, utilities and transportation, with 47% made in the energy sector alone. In terms of project stage, 29% of deals have been made in greenfield assets, 21% in brownfield projects and 50% in more established secondary stage assets.