Archive for February, 2022

Infrastructure Managers Rake in $124B for
New Fundraising Record

Posted by Muhammad Ibrahim Masudi

Money poured into infrastructure funds at a record pace last year, powered by factors such as a post-pandemic rebound, a range of potential risk and return options and a wide array of investment targets – crumbling highways and bridges, 5G cell towers, data centers, renewable energy plants and battery storage installations.

EQT’s fifth infrastructure fund was by far the biggest to close last year, raising $18 billion, while Copenhagen Infrastructure Partners was next with $8.4 billion for its fourth fund. And the fundraising rush has continued in early 2022 with Stonepeak Infrastructure Partners closing its fourth North America fund at $14 billion earlier this month and Partners Group this week closing its third infrastructure fund at $6.4 billion, which it will invest alongside another $2.1 billion in separate accounts and other vehicles.

And with more and bigger managers becoming increasingly active in the space, indications are that this year will be just as strong for the asset class.

Last year had 117 infrastructure funds close overall with $124 billion in assets, according to new data from Preqin. While the fund count was down from 143 in 2020 and 147 in 2019, the total dollars raised was an
easy record, up from $113 billion in 2020 and $118 billion in 2019, per Preqin.

The average fund size was up as well, continuing a multi-year trend of larger and larger infrastructure funds. The average such fund is now about $1.5 billion, up from just $600 million in 2016, according to Campbell Lutyens data.

Some of the inflows last year were held over from the lockdown interrupted year of 2020. “Infrastructure had a strong bounce-back year after Covid impacted fund closings in 2020 and pushed out allocations to
2021,” said Eugene Park, principal at Mercury Capital Advisors.

Several other managers had large closes beyond EQT and Copenhagen’s funds, including Macquarie Infrastructure Partners, which closed its sixth Americas fund at $6.9 billion, according to Preqin data. In addition, Wren House raised $5 billion, Manulife closed its second infrastructure fund at $4.7 billion in November, and Ares Management raised $2.2 billion for its Ares Climate Infrastructure Partners Fund.
Other big managers raising big money in 2021 included Blakstone Group’s open-end infrastructure fund, which brought in $6.7 billion in the fourth quarter, said Jon Gray, the manager’s president and chief operating officer, on an earnings call in late January. And Brookfield Asset Management held a $7 billion first close of its energy transition fund in July, on its way to a target of more than double that figure.
And early this year, Apollo Global Management announced a close for its second infrastructure equity fund at more than $2.5 billion.

Various managers are still in the market with large infrastructure funds beyond Brookfield. KKR is targeting $12 billion for its fifth infrastructure fund, while I Squared Capital is aiming for the same amount for its third fund.

The longstanding low-interest-rate environment has been a big driver of money into infrastructure, according to Gordon Bajnai, head of global infrastructure at Campbell Lutyens. “A lot of new money is coming into infrastructure allocations, and most of that new money is going to high single-digit-yielding, downside-protected, long-term core infrastructure,” he said. “That’s because investors are trying
to replace negative-yielding fixed income investments with core infrastructure.”

One of the biggest areas of interest for infrastructure investors last year was the transition to a low-carbon economy – with more deals targeting renewable power, battery storage and other sustainability projects, broadly referred to as “energy transition” investments.

“One of the dominant themes last year was around renewables and clean energy,” said Christian Busken, senior vice president and director of real assets at Fund Evaluation Group. “Anything with that label attached to it was getting a fair amount of attention.”

Such investments grew thanks to a virtuous circle of increased investor demand and a growing opportunity set, said Iftikhar Ahmed, partner at Aon’s investment consulting unit. That’s clear from the success of funds from the likes of Brookfield and Ares, though many infrastructure funds now include an energy transition sleeve as well. “It’s a trend that’s not reversing anytime soon,” he said. “We expect growth in dedicated sustainable/energy transition funds and an increased focus on sustainable/energy transition deals by otherwise diversified funds.”

And Bajnai cites recent studies that forecast hundreds of billions of dollars of climate-related infrastructure investment in the near term.

“That’s a massive increase – more than doubling the speed of deployment in a few years,” he said.
Indeed, Brookfield had planned to close its energy transition fund at $12.5 billion, but later upped the target to $15 billion, CEO Bruce Flatt said at a conference in December. That $15 billion “could have been more,” he added.

It helps that managers can create a wide array of investment strategies from such assets. “Energy transition is a space that is growing so fast that you can easily allocate to different risk/return strategies within the asset class,” Bajnai said. That can range from a low-risk product built around proven technologies targeting a 5% return to something that’s “more technologically risky” with a 20% return target, he pointed out.

Another area seeing attention from both investors and managers is digital infrastructure, such as cell towers and data centers. “We’ve seen various groups raising capital around that theme, and I think
those areas are going to remain on everybody’s radar,” Busken said.

A Campbell Lutyens survey last fall of institutional investors found more than 50% of respondents expressing ongoing interest in energy transition investments, while 50% say they want more digital infrastructure.

Inflation could be another driver of flows into infrastructure investments, which often are seen as a hedge against inflation, “due to the nature of long-term contracts with inflation-linkage and the essentiality of the assets to economic activity,” Park noted. While it’s not entirely clear if infrastructure actually does provide protection from inflation, the belief is there, and as Park put it, “We expect inflationary concerns to continue driving allocations to this asset class.”

And the $1 trillion infrastructure bill that President Biden signed into law last November might also have only a limited impact on the space, some experts believe. Such spending programs tend to come with “long procurement processes,” Ahmed noted.

But that’s unlikely to be a drag on the continued growth of infrastructure investing overall. “We expect the overall fundraising to remain strong in 2022, if not even stronger,” Ahmed said.

Mercury Capital Advisors Boosts its US Origination and Distribution Capabilities

Posted by Muhammad Ibrahim Masudi
(Picture – James Howe (left), Michael Dunham (right))

Mercury Capital Advisors announced today that it has added James Howe and Michael Dunham as Partners to further enhance its origination and distribution capabilities. Howe and Dunham are based out of Mercury’s New York office. Mr. Howe will be leading Mercury’s US Origination efforts, while Mr. Dunham joins as a Partner on the US Distribution Team.

“We are thrilled to welcome James and Michael to the Firm. We continue to see a strong momentum of deal flow in 2022 across all our verticals: fund placements, directs, and secondary advisory transactions. With decades of experience in private markets, we are confident that James and Michael will contribute significantly to the next phase of our growth,” said John Franklin and Enrique Cuan, Managing Partners at Mercury.

Mr. Howe joins Mercury from Stanwich Advisors where he managed Origination, Distribution and Project Management functions. He started his financial industry career at UBS, where he was one of the founding members of the UBS Private Equity Funds group and managed placement teams. After a 14-year tenure at UBS, he joined Strategic Value Partners in a fundraising capacity for its private equity structured vehicles and hedge fund products. Mr. Howe then spent 9 years at NovaFund Advisors, a private equity fund advisory and placement firm that he established and built.

Mr. Dunham also brings a tenured placement expertise to the Firm after spending 16 years as a Partner at Pinnacle Trust Partners, an independent placement and advisory firm for alternative investments. Prior to joining Pinnacle, Mr. Dunham was a Senior Vice President at Trust Company of the West (TCW), a $265 billion asset management firm based in Los Angeles, CA, where he was responsible for marketing all investment products to insurance companies and other financial institutions. Earlier in his career, Mr. Dunham worked in Institutional Sales at JP Morgan Securities and UBS Securities in New York.

These appointments come on the back of a very strong year for Mercury in 2021, having advised on several fund closings including those of American Landmark, Ocean Link, MML, Valor Equity Partners, Gaw Capital Partners, Blue Torch Capital and Investcorp. Mercury continues to expand its global placement capabilities; it has currently local distribution presence in New York, London, Dubai, Singapore, Tokyo and Los Angeles covering institutions and family offices in North America, Europe, Asia and the Gulf.

About Mercury Capital Advisors

Mercury Capital Advisors is a leading global private fund and investment advisory firm. Founded in 2009 as a spinoff from the Merrill Lynch Private Funds Group, the firm assists general partners and limited partners in fundraising and secondary advisory, co-investment and direct deal placement. The firm specializes in alternative assets including private equity, real estate, infrastructure, credit, venture capital, secondaries and special situations investments. Mercury has advised on over 100 fundraisings and closed over $100 billion in fund commitments since its inception in 2009.

With offices in New York, London, Singapore, Tokyo and New Delhi, the firm maintains strong relationships with a broad range of the world’s pre-eminent institutional investors, including sovereign wealth funds, corporate and public pension plans, insurance companies, endowments, family offices, foundations, secondary funds, funds of funds and consultants.

Mercury Capital Advisors is a 100% owned subsidiary of Investcorp, a global investment manager specializing in alternative investments across private equity, real estate, credit, absolute return strategies, GP stakes and infrastructure. As of June 30, 2021, Investcorp Group had US $37.6 billion in total AUM, including assets managed by third-party managers, and employed over 430 people from 45 nationalities globally across its offices in 12 countries spanning the US, Europe, GCC and Asia.


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