Private infrastructure funds are heading for new records after unprecedented fundraising in 2018.
Investments firms last year raised $85 billion targeting infrastructure globally, shattering the record $75 billion amassed in 2017, according to a Preqin report released Monday. Investors seem optimistic about 2019, with 208 funds seeking an unprecedented $193 billion in capital, the alternative-assets data provider said.
Brookfield Asset Management and Global Infrastructure Partners are each targeting $20 billion pools, which, if successful, would be among the largest infrastructure funds ever completed, according to the report. Renewable energy is driving deal making in the sector, particularly in Europe, where the government policy is promoting is production.
“There is a push globally towards more sustainable energy sources,” said Patrick Adefuye, head of real assets at Preqin, by phone. “Conventional energy sources have been damaging the environment, and they’re finite.”
Preqin data show that 57 percent of infrastructure deals completed in 2018 were in renewable energy, rising from 50 percent in 2017 and 45 percent in 2016. What’s more, renewable energy deals far exceeded those in any other infrastructure category last year, with utilities and energy being the next most active segments with 12 percent of deals each.
Adefuye said that the European Union’s renewable energy directive — which is targeting 20 percent renewable energy use by 2020 — is a major reason for the growth in fundraising.
“Government policy and a willingness from the government at a national level to get an increase of renewable energy have helped increase investments,” he said.
More infrastructure funds were closed in Europe than in North America in 2018, though the region raised less capital. Twenty-two North American-focused funds raised $44 billion last year, compared to 33 European-focused funds amassing a total $35 billion, Preqin data show.
Although the data provider said in February that it expected President Donald Trump’s infrastructure plan to energize investors in the U.S., Adefuye said he hasn’t seen much movement from the White House to follow up on the program.
“There haven’t been any concrete steps that Trump has taken,” he said. “The infrastructure asset class has been one that has enjoyed good performance in recent years. I think that is driving fundraising levels more than anything else.”
Blackstone Group announced in 2017 that it was launching a $40 billion infrastructure investment fund, and that the Public Investment Fund of Saudi Arabia was expecting to contribute $20 billion. “This potential investment reflects our positive views around the ambitious infrastructure initiatives being undertaken in the United States as announced by President Trump,” H.E. Yasir Al Rumayyan, managing director of Saudi Arabia’s Public Investment Fund, said in the 2017 statement from Blackstone.
The infrastructure fund has completed a first close of $5 billion, half of which was contributed by the Saudi Arabia's Public Investment Fund, which has agreed to make a dollar-for-dollar match up to $20 billion, according to a transcript of an earnings call in July 2018. The open-ended investment pool is set to complete another phase of fundraising this spring, according to a person familiar with the matter.
The largest infrastructure fund to close in 2018 was KKR’s Global Infrastructure Investors III at $7.4 billion, according to Preqin, which said 71 percent of funds closed last year exceeded their targets.
Meanwhile, Global Infrastructure Partners IV, which aims to raise $20 billion, has drawn some interest from U.S. pension funds.
The fund is being considered by the Oregon Investment Council for an investment of up to $400 million, meeting minutes from December 12 show. The Maine Public Employees Retirement System has committed to allocate as much as $150 million to the new pool, October meeting minutes show.
A spokesperson for Global Infrastructure Partners declined to comment on the fundraising, while a spokesperson for Brookfield didn't immediately respond to an emailed request for comment about its new fund.