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The Largest Managers Raise the Lion’s Share of New Infrastructure Money

With ample dry powder, infrastructure investments are expected to remain robust, according to a new PitchBook report.

As investors brace for a potential recession, infrastructure continues to dominate real asset fundraising.

According to PitchBook’s latest global real assets report, infrastructure funds took in the overwhelming share of capital from investors in the first three quarters of 2022, accounting for 96 percent of fundraising in the category.

Oil and gas made up only 2.4 percent, with an “other” category — which includes timber, real assets and natural resources, metals and mining, and agriculture — taking 1.6 percent of the total.

“Infrastructure is sometimes regarded as a haven for investors in times of volatility, inflation, and recession, with its ability to continue providing moderate but consistent returns seen as far more valuable in the face of macroeconomic uncertainty,” the report stated.

Earlier this year, Preqin, another research firm focused on alternatives, also found that investors were shifting to more defensive infrastructure investments in light of the current environment. Nevertheless, infrastructure isn’t immune to the macro headwinds impacting other asset classes, since strategies vary and aren’t equally positioned to surmount the challenges.

Overall, fundraising for the asset class slowed considerably, down from $47.1 billion and $37.3 billion in the first and second quarters, respectively, to $10.9 billion in the third. “Despite this, robust activity in the first half of the year means that infrastructure funds will likely see a year-end raised capital metric in line with historical averages,” the report stated.

With the capital-intensive nature of infrastructure projects, experienced managers continued to raise the most money with fund sizes of $5 billion or more.

One of the top five funds of 2022 was raised by a first-time fund from a well known manager — Brookfield, a major player with $725 billion in assets under management. “With such large funds, we may see infrastructure take-private activity intensify as private infrastructure fund investors swoop in to take advantage of relatively cheaper assets in the wake of the public market downturns of 2022,” the report stated.

Dry powder for infrastructure projects remained high at $287.6 billion at the end of the third quarter, with 59.8 percent of that in funds of $5 billion or more and 29.8 percent in fund sizes between $1 billion and $5 billion. In light of those figures, PitchBook expects strong investing activity in the asset class to continue for at least the next several years.

The top three infrastructure funds to close in 2022 were KKR’s $16.7 billion core fund, followed by Brookfield’s $15 billion opportunistic fund, and I Squared Capital’s $15 billion value-added fund.

Overall, the real assets industry saw a strong fundraising environment in the first two quarters amid a heightend inflationary environment and rising interest rates. But the total slowed in the third quarter. Out of the $99.3 billion raised during the first nine months of the year, only $11.2 billion was raised in the third quarter.

“While Q3’s numbers may drift upward as more fundraising is captured for the quarter, this activity still signifies a slowdown compared with previous quarters,” the report stated. “LPs are feeling a pinch due to the macroeconomic headwinds of 2022, receiving fewer distributions and experiencing the ‘denominator effect’; as such, they are slowing commitments throughout the private markets,” according to the report.

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