Infra fundraising rebounds sharply in Q1 2010

Infrastructure funds raised $5.9bn globally, or more than half the 2009 total and more than three times the total for the same period last year. If the momentum continues, infrastructure fundraising could eclipse the 2009 total by the first half of this year, according to Probitas Partners.

Infrastructure fundraising rebounded sharply in the first quarter of 2010, with infrastructure funds globally raising $5.9 billion, more than half the 2009 infrastructure fundraising total, in the first three months of the year.

The fundraising data, compiled by San Francisco-based placement agent Probitas Partners, indicates that fundraising is off to a much stronger start than 2009, when infrastructure funds raised only $1.6 billion during the first quarter and $10.7 billion for the whole year. 

“I was expecting there to be some sort of pick-up, but basically 50 percent of the level of last year was not what I was expecting,” said Kelly DePonte, a partner at Probitas.

Infrastructure Fundraising: on the upswing
Source: Probitas Partners

It is normal to see a pop in fundraising in the first quarter of the year, as many institutional investors often hold off on a commitment they want to make to fit it into the next calendar year’s allocation. But last year, institutional investors’ allocations were so battered that this seasonal factor alone, DePonte believes, doesn’t tell the whole story.

Instead, DePonte believes the overall stabilisation in equity markets was a big contributing factor. Equity markets have gradually been gaining strength since the market lows in the first quarter of 2009. On 6 March 2009, the Dow Jones Industrial Average, an overall benchmark of market performance, bottomed out at 6,626.94; on Monday, it closed above 11,000 for the first time since September 2008.

Parallel to this rise, with the exception of the usual summer dip in fundraising, infrastructure capital commitments gained strength later in 2009, topping $5.4 billion in the fourth quarter.

“As the markets began to stabilise, it was a good pick-up in the fourth quarter of 2009 and that pick-up has continued in this quarter,” DePonte said.

Energy funds, in particular, have done well among investors. Of the $5.9 billion first quarter 2010 total, more than $2 billion went to energy-focused infrastructure funds. These included a $500 million first close for the First Reserve Energy Infrastructure Fund, a $1.25 billion close by Energy Capital Partners II (following a $1.75 billion close in December 2009), and a $300 million close for a midstream oil and gas infrastructure fund managed by EnCap Investments, according to DePonte’s estimates.

Another important first quarter fundraising milestone was the launch of the Marguerite Fund, or the 2020 European Fund for Energy, Climate Change and Infrastructure. That fund won core backing from 6 European Institutions at €100 million each – European Investment Bank, Caisse de Depots et Consignations, Cassa Depositi e Prestiti, KfW – Bankengruppe, Instituto de Credito Official and PKO Bank Polski. Together with some additional commitments, it closed on a total of €750 million during the first quarter, or nearly half its €1.5 billion total fundraising target.

Other fund managers to enjoy fundraising success included Toronto-based Brookfield, which closed on $800 million across a cluster of three infrastructure funds – its Peruvian fund ($460 million), Colombian fund ($41 million) and its Americas fund ($300 million). And Alinda Capital Partners, which celebrated the final close of its second infrastructure fund on $4 billion in January, raised $597 million toward that goal during the first quarter, DePonte estimates.

Looking ahead, DePonte is optimistic that infrastructure fundraising will continue to strengthen. “I think we’ve got some momentum here,” he said. “I’m not sure if I would say ‘[take] $5.9 billion and multiply it by four for the yearly total,” he added. “The summer months are always a slow period for fundraising.”

Still, given the weakness of last year’s total, “I don’t see how the fundraising total for 2009 does not easily get eclipsed this year,” DePonte said.

“And the spring, the second quarter, is very often a good fundraising total. It would not surprise me at all if more money was raised in the first half of 2010 than was raised in all of 2009,” he said.