New York-based fund manager Alinda Capital Partners recently followed it debut $3 billion infrastructure fund by closing a $4 billion successor. While the second fund fell $1 billion short of its hard cap, the fact that it beat its target by the same amount was seen by many as a notable achievement given the strong headwinds that buffeted those seeking fresh capital last year.
In an interview included in the March 2010 issue of Infrastructure Investor (see related item, above right) – itself the prelude to a major Keynote interview in the April issue – Christopher Beale, Alinda’s managing partner, says the admired fundamentals of infrastructure investing were forgotten by some of the firm’s rivals during the boom years.
“In 2007, there was a bubble especially in ports,” he says. “Some very high prices were being paid, and some buyers were taking on too much debt. The unusually severe recession hit ports hard. They were shown to be much more GDP-dependent than anyone had expected.”
He adds: “Infrastructure isn’t an investment category where you can make transformational changes the way you would like to do in private equity. So, if you pay too much in infrastructure, it’s very difficult to make up the returns later.”
Beale concludes: “The unusually severe recession exposed big differences in the performance of GPs’ portfolios. Infrastructure is a relatively young asset category and the downturn’s effect on infrastructure portfolios provided a laboratory experiment for investors. LPs didn’t have to wait 10 years to judge relative performance.”