Record number of infrastructure funds raising money, worst results in years
More private-equity infrastructure funds are seeking to raise money around the world than ever before, but with the increase in competition, funds are struggling to reach their funding goals; 131 unlisted infrastructure funds are seeking to raise a total of $92.1 billion; so far only two infrastructure funds reached their fundraising goals, raising a total of $600 million, the lowest amount in seven years; in the first quarter of 2010, seven funds met their goals raising a total of $7.5 billion dollars; infrastructure funds will likely become more popular as inflation rises but analysts expect funds to raise less money than in previous years
More private-equity infrastructure funds are seeking to raise money around the world than ever before, but with the increase in competition, funds are struggling to reach their funding goals.
According to Preqin, a market research firm, 131 unlisted infrastructure funds are seeking to raise a total of $92.1 billion this year. These funds are actively soliciting large institutional investors like pension funds and insurance firms.
This increase in competition has made it more difficult to hit funding goals, forcing funds to stay in the market for longer periods of time.
Only two infrastructure funds reached their fundraising goals in the first quarter of 2011, raising a total of $600 million, the lowest amount in seven years. In contrast, in the first quarter of last year, seven funds met their goals raising a total of $7.5 billion dollars.
Elliot Bradbrook, an analyst with Preqin, said, “I would not say that the fundraising market is drying up as such. As we know from our research there are many more investors now interested in gaining exposure to infrastructure, and more fund managers are beginning to launch funds.”
“I think it is a case of there being more funds on the road for investors to choose from, plus investors are now much more stringent before making commitments,” he explained.
Bradbrook noted that eight funds held an interim close this year, raising $2.2 billion. But these numbers also reflect money raised prior to 2011.
Bradbrook remains optimistic about fundraising prospects, but is careful to note the effect of the additional funds.
“We expect fundraising to pick up throughout the year, but the likelihood is that these funds will raise less capital than in previous years,” he said.
According to Preqin, infrastructure funds will likely become more popular as inflation rises as investments are stable and inflation-proof. But investors are unlikely to stray from more established funds and put money in the newer funds.
