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European Infrastructure Funds Raise Record Capital

The European Commission is offering incentives to help fill a massive funding gap for infrastructure projects.

  • Alicia McElhaney

Private infrastructure funds focused on the European market raised a record amount of capital last year, benefiting in part from government incentives.

The funds raised €25 billion ($27.8 billion) last year, surpassing the record raised in 2015 by 50 percent, according to a Preqin report Thursday. The financial data provider said funds this year have secured €6.5 billion, including the €4 billion EQT Infrastructure III, which closed in February.

“With government incentives arising from the European Commission driving activity and growth in the infrastructure sector, the region has seen record levels of capital secured in recent years by increasingly large unlisted infrastructure funds,” Preqin said in the report.

European infrastructure has a massive funding need after governments reigned in spending during the global financial crisis in 2008, with European Investment Bank estimating that as much as $2 trillion is needed by 2020.

“This investment is vital if Europe’s economy is to continue to recover and be set on a path of sustained growth,” according to an Invest Europe report on infrastructure investment in November. Invest Europe didn’t respond to an email seeking comment.

In 2015, the European Commission amended Solvency II, its insurance regulation, to incentivize insurers to invest in infrastructure. The commission cut back on capital charges for investments in qualifying infrastructure investments, making it more worthwhile for investors to raise capital for infrastructure funds.

Fund managers including Macquarie Infrastructure and Real Assets, EQT Funds Management and Antin Infrastructure Partners have raised the largest piles of capital in the past 10 years for unlisted infrastructure funds, according to Preqin. The firm didn’t return a phone call seeking comment about its European infrastructure research.

The U.S. also has tremendous need for infrastructure investment. The American Society of Civil Engineers gave the United States a D+ for its infrastructure in 2017, meaning significant upgrades are required.

Globally, North America has raised the most capital this year for infrastructure funds. The region represents 60 percent of capital pooled in 2017, according to Preqin, which says the fundraising has been driven by the $15.8 billion closing of Global Infrastructure Partners III.