Content Includes:
Fundraising
Preqin Special Report:
Infrastructure Debt
September 2016
2015 saw average
infrastructure debt fund
sizes reach record levels.
Funds in Market
A record 43 of infrastructure
debt funds are currently in
market, seeking $25bn in
capital commitments.
Fund Managers
Almost three-quarters of
infrastructure debt fund
managers are first-time
fund managers.
Investor Appetite
Debt vehicles are
targeted by over a fifth of
infrastructure investors that
have plans to invest in the
next year.
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Foreword
Infrastructure debt has become an increasingly prominent component of the unlisted infrastructure industry. Regulation has had
an effect on the levels of capital traditional lenders have been able to allocate and therefore created a significant niche of unlisted
managers to provide debt financing for infrastructure projects. A record 43 debt funds are currently in market, seeking $25bn in
capital commitments, representing a 10% increase in capital targeted from the same time last year. Fundraising has also seen
notable progress, and although the $12bn peak in capital raised by funds closed in 2013 has not yet been matched, funds closed
in 2015 came close.
Fund managers are seeking to raise ever larger vehicles; average fund size has increased in recent years, although infrastructure
debt managers need to gain further experience in the market in order to avoid the bifurcation between the largest firms and the
newer entrants to the industry. Capital is already becoming concentrated among the brand name fund managers and with the
majority of debt fund managers having closed no debt funds previously, first-time funds must deliver positive returns to investors
to enable growth within the industry to continue.
Unsurprisingly, banks and investment banks make up the largest proportion (19%) of investors with a preference for unlisted
infrastructure debt; these investors tend to have the resources and expertise to invest in the market as well as a more positive
sentiment since the financial crisis. The vast majority (87%) of investors in the unlisted debt market have $1bn or more in assets
under management (AUM), with a significant 18% holding $100bn or more. Furthermore, the largest proportion (31%) of investors
with a preference for unlisted infrastructure debt are based in Asia, indicating potential growth in this market.
Preqin Special Report: Infrastructure Debt takes a detailed look at the unlisted debt market, including fundraising, fund
managers and active institutional investors. This report supplements the information on Preqin’s Infrastructure Online service,
which contains details on 575 unlisted debt funds, 58 fund managers and 519 institutional investors with a preference for unlisted
infrastructure debt. We hope you find this report useful and welcome any feedback you may have. For more information, please visit
www.preqin.com or contact [email protected].
The Leading Source of Intelligence on the Infrastructure Industry
Preqin’s Infrastructure Online is Preqin’s flagship online infrastructure information resource. This constantly updated
resource includes details for all aspects of the asset class, including infrastructure transactions, fund managers, strategic
investors and trade buyers, net-to-investor fund performance, fundraising information, institutional investor profiles and more.
For more information, please visit: www.preqin.com/infrastructure
Contents
Fundraising
3
Funds in Market
4
Fund Managers
5
Investors
6
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means, or stored in any electronic or other data storage medium, or printed or published in any document, report or publication, without the express prior written approval of Preqin Ltd. The information presented in Preqin Special Report:
Infrastructure Debt, September 2016 is for information purposes only and does not constitute and should not be construed as a solicitation or other offer, or recommendation to acquire or dispose of any investment or to engage in any other
transaction, or as advice of any nature whatsoever. If the reader seeks advice rather than information then he should seek an independent financial advisor and hereby agrees that he will not hold Preqin Ltd. responsible in law or equity for
any decisions of whatever nature the reader makes or refrains from making following its use of Preqin Special Report: Infrastructure Debt, September 2016. While reasonable efforts have been made to obtain information from sources that are
believed to be accurate, and to confirm the accuracy of such information wherever possible, Preqin Ltd. does not make any representation or warranty that the information or opinions contained in Preqin Special Report: Infrastructure Debt,
September 2016 are accurate, reliable, up-to-date or complete. Although every reasonable effort has been made to ensure the accuracy of this publication Preqin Ltd. does not accept any responsibility for any errors or omissions within Preqin
Special Report: Infrastructure Debt, September 2016 or for any expense or other loss alleged to have arisen in any way with a reader’s use of this publication.
2
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Preqin Special Report: Infrastructure Debt
Fundraising
The unlisted debt market has risen in
prominence over a relatively short period
of time, with debt funds representing just
6% of funds closed in 2009, compared
with almost a quarter (24%) of funds
closed in 2015 (Fig. 1).
Since 2009, 89 unlisted infrastructure
debt funds have reached a final close,
raising an aggregate $43bn (Fig.
2). Fundraising peaked in 2013 with
$12.0bn in institutional capital raised
from 21 unlisted infrastructure debt
funds closed, and despite the market
cooling in 2014, 2015 saw $11.6bn
raised from only 14 funds.
As illustrated in Fig. 3, North Americafocused infrastructure debt funds have
raised the most capital since 2009
($13.7bn), and while Asia has seen the
greatest number of funds (37) close in
the period, these vehicles are generally
smaller and consequently Asia-focused
funds have secured only $10.6bn.
Overall, infrastructure debt funds have
grown in size over time; the average
Fig. 1: Unlisted Infrastructure Debt Fundraising as a
Proportion of All Unlisted Infrastructure Fundraising,
2009 - 2016 YTD (As at 5 August 2016)
Fig. 2: Annual Unlisted Infrastructure Debt Fundraising,
2009 - 2016 YTD (As at 5 August 2016)
30%
25
26%
25%
Proportion of Funds Closed
size of funds closed in 2015 reached a
record $826mn and stands at $729mn
for funds closed in 2016 so far (Fig. 4).
This is most likely due to some notably
large funds closing in this time period:
five of the 10 largest debt funds to close
since 2010 did so in 2015 or 2016.
Westbourne Capital Infrastructure Debt
Fund Program 1 is the largest fund to
have reached a final close in the last two
years, securing AUD 4.8bn.
21
25%
24%
20
22%
19%
20%
15
16%
14
14
14
12.0 12
15%
10
11.6
Aggregate
Capital
Raised ($bn)
8
10%
6.6
6%
4.1
5
5%
2
0.3
0
0%
2009
2010
2011
2012
2013
2014
2015
2009
2016
YTD
2010
2011
2012
2013
2014
Fig. 3: Unlisted Infrastructure Debt Fundraising by Primary
Geographic Focus, 2009 - 2016 YTD (As at 5 August 2016)
900
30
700
No. of Funds
Closed
22
20
17
10
10.6
7.5
Aggregate
Capital Raised
($bn)
5
Average Fund Size ($mn)
800
11.2
2016
YTD
Fig. 4: Average Unlisted Infrastructure Debt Fund Size,
2009 - 2016 YTD (As at 5 August 2016)
35
13 13.7
2015
Source: Preqin Infrastructure Online
37
25
2.9
Year of Final Close
Source: Preqin Infrastructure Online
40
4
4.0
1.5
Year of Final Close
15
No. of Funds
Closed
19%
826
729
572
600
471
500
400
361
292
300
200
151
188
100
0
North
America
Europe
Asia
Rest of World
Primary Geographic Focus
Source: Preqin Infrastructure Online
© 2016 Preqin Ltd. / www.preqin.com
0
2009
2010
2011
2012
2013
2014
2015
2016
YTD
Year of Final Close
Source: Preqin Infrastructure Online
3
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Preqin Special Report: Infrastructure Debt
Funds in Market
The number of unlisted infrastructure
debt funds in market and the aggregate
capital targeted by these funds has
increased steadily since 2011. There
are currently a record 43 unlisted
infrastructure debt funds in market,
seeking $25bn in investor capital, which
represents a 10% increase in capital
targeted from the same time last year
(Fig. 5).
capital commitments, indicating growing
appetite from investors for accessing the
infrastructure debt market.
As Fig. 6 illustrates, North America and
Europe are the most targeted regions
by unlisted infrastructure debt funds
in market. While there are two more
Europe-focused funds in market than
North America-focused funds (16 vs.
14 respectively), less capital is being
targeted by Europe-focused funds
($10.3bn vs. $12.3bn respectively).
Of the 43 infrastructure debt funds
in market, 21 have already held an
interim close, securing $15.2bn in
Fig. 5: Unlisted Infrastructure Debt Funds in Market over
Time, August 2011 - August 2016 (As at 5 August 2016)
Fig. 6: Unlisted Infrastructure Debt Funds in Market by
Primary Geographic Focus (As at 5 August 2016)
100%
50
45
90%
35
35
32
30
25
22.8
20
18
19 18.8
25.0
19.4
Aggregate
Target
Capital ($bn)
14
8.5
10
No. of Funds
Raising
10.3
Proportion of Funds in Market
43
40
15
The two largest infrastructure debt
funds in market are Carlyle Energy
Mezzanine Opportunities Fund II and
Global Infrastructure Partners Capital
Solutions Fund (Fig. 7). Both funds
are seeking $2.5bn from institutional
investors and primarily target North
American infrastructure assets. Other
sizeable funds include AMP Capital
Infrastructure Debt Fund III, seeking
$2bn in capital commitments, and MultiStrategy Infrastructure Fund, looking to
secure £1bn in investor capital.
8%
2%
21%
80%
9%
70%
41%
60%
Rest of World
Asia
37%
50%
Europe
40%
30%
North America
49%
20%
33%
10%
5
0%
No. of Funds Raising
0
Aug-11 Aug-12 Aug-13 Aug-14 Aug-15 Aug-16
Aggregate Target
Capital
Source: Preqin Infrastructure Online
Source: Preqin Infrastructure Online
Fig. 7: 10 Largest Unlisted Infrastructure Debt Funds in Market (As at 5 August 2016)
Fund
Geographic Focus
Target Size (mn)
Carlyle Group
North America
2,500 USD
Global Infrastructure Partners
Australasia, Europe,
North America, OECD
2,500 USD
AMP Capital Investors
Australasia, Europe,
North America, OECD
2,000 USD
Pensions Infrastructure Platform
UK
1,000 GBP
La Banque Postale Asset
Management
Europe
1,000 EUR
Sequoia Euro Infrastructure Debt Fund
Sequoia Investment Management
Company
Europe
1,000 EUR
AB European Infrastructure Debt Fund
AB
Europe, OECD
1,000 USD
Triloma EIG Global Energy Fund
Triloma Energy Advisors
Global
1,000 USD
Triloma EIG Global Energy Term Fund I
Triloma Energy Advisors
Global
1,000 USD
DuSable Capital Management
Global
1,000 USD
Carlyle Energy Mezzanine Opportunities Fund II
Global Infrastructure Partners Capital Solutions Fund
AMP Capital Infrastructure Debt Fund III
Multi-Strategy Infrastructure Fund
LBPAM European Debt Fund
Yurus Private Equity Fund I
Firm
Source: Preqin Infrastructure Online
4
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Preqin Special Report: Infrastructure Debt
Fund Managers
The relative youth of the infrastructure
debt fund market is demonstrated in Fig.
8: nearly three-quarters (74%) of unlisted
infrastructure debt funds are managed
by firms with no prior experience in the
market, while a further 17% of fund
managers have raised only one or two
debt funds previously.
Due to the lack of long, established
track records, managers will often
seek to raise smaller funds, and
correspondingly, 67% of infrastructure
debt fund managers have secured less
than $500mn for unlisted funds over the
last 10 years (Fig. 9). However, there are
still large managers in the industry: a fifth
of infrastructure debt managers have
secured $1bn or more in institutional
capital commitments in the last decade.
Washington DC-headquartered, EIG
Global Energy Partners is the largest fund
manager in the unlisted infrastructure
debt industry, having raised $13.2bn
in investor capital in the last 10 years
from four unlisted debt funds (Fig. 10).
Forty-six percent of EIG Global Energy
Partner’s total was secured by EIG
Energy Fund XVI alone, which closed in
December 2013 on $6bn.
Fig. 8: Unlisted Infrastructure Debt Fund Managers by
Experience
Of particular note is the number of
managers in the top 10 that have secured
relatively high amounts of capital for
a first-time infrastructure debt fund.
Unsurprisingly, these are familiar names
with extensive track records in the wider
private equity and infrastructure markets,
such as Carlyle Group, which secured
$1.4bn in capital for its first infrastructure
debt fund, Carlyle Energy Mezzanine
Opportunities Fund, and EIG Global
Energy Partners’ EIG Energy Fund
X, which secured $734mn in capital
commitments.
Fig. 9: Unlisted Infrastructure Debt Fund Managers by
Total Capital Raised for Unlisted Infrastructure Debt in the
Last 10 Years
4%
5%
First-Time Debt Fund
Manager
17%
1-2 Debt Funds
Previously Raised
3-4 Debt Funds
Previously Raised
74%
5 or More Debt Funds
Previously Raised
Proportion of Fund Managers
80%
70%
67%
60%
50%
40%
30%
17%
20%
12%
10%
3%
0%
Less than
$500mn
$500-999mn
$1-4.9bn
$5bn or More
Total Capital Raised in Last 10 Years
Source: Preqin Infrastructure Online
Source: Preqin Infrastructure Online
Fig. 10: 10 Largest Fund Managers by Aggregate Capital Raised* for Unlisted Infrastructure Debt Funds in the Last
10 Years
Firm
EIG Global Energy Partners
KDB Infrastructure Investments Asset Management
Westbourne Capital
Macquarie Infrastructure Debt Investment Solutions
CCCC Fund Management
Copenhagen Infrastructure Partners
Abraaj Capital
AMP Capital Investors
Asian Development Bank
Carlyle Group
Headquarters
No. of Unlisted Infrastructure
Debt Funds Raised
in Last 10 Years
Total Capital Raised for
Unlisted Infrastructure Debt
Funds in Last 10 Years ($bn)
US
4
13.2
South Korea
22
5.1
Australia
1
3.7
UK
6
3.6
China
1
2.3
Denmark
1
2.2
United Arab
Emirates
1
2.0
Australia
2
1.6
Philippines
1
1.5
US
1
1.4
Source: Preqin Infrastructure Online
*Capital raised for closed-end unlisted infrastructure funds. Does not include capital raised for open-ended funds or separate accounts.
© 2016 Preqin Ltd. / www.preqin.com
5
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Preqin Special Report: Infrastructure Debt
Investors
Preqin’s Infrastructure Online currently
tracks
519
institutional
investors
across the globe with a preference for
unlisted infrastructure debt. Banks and
investment banks make up the largest
proportion at 19%, followed by insurance
companies (16%) and public pension
funds (14%, Fig. 11).
Fig. 11: Institutional Investors with a Preference for Unlisted Infrastructure Debt
by Type
Bank/Investment Bank
Insurance Company
10%
19%
4%
Public Pension Fund
4%
Private Sector Pension Fund
With typically large institutions by assets
under management (AUM) making up
notable proportions of the infrastructure
debt investor universe, it is unsurprising
that over half (56%) have $10bn or more
in AUM, including a significant 18% with
$100bn or more in assets (Fig. 12). Only
13% of investors hold less than $1bn in
assets.
The largest proportion (34%) of
investors with a preference for unlisted
infrastructure debt investments are
based in Asia, with 24% based in North
America and 24% in Europe (Fig. 13).
Less than a fifth (18%) of investors
are based outside the aforementioned
regions, with those headquartered in
Africa and Latin America accounting for
the smallest proportion of investors at
4% each, likely a result of the age and
depth of the infrastructure debt market in
these regions.
5%
Asset Manager
16%
7%
Government Agency
Investment Company
9%
Foundation
14%
11%
Superannuation Scheme
Other
Source: Preqin Infrastructure Online
Those investors that target debt
investments are more likely to hold
separate allocations to infrastructure
than all other investors in the asset class,
indicative of the level of sophistication
required to invest in infrastructure
debt. Forty-six percent of institutional
investors with a preference for debt
maintain a separate allocation to the
asset class, compared with a third of all
other investors (Fig. 14).
Fig. 12: Institutional Investors with a Preference for
Infrastructure Debt by Assets under Management
In a recent survey of institutional
infrastructure investors in June 2016,
a fifth of respondents view debt/
mezzanine strategies as presenting
the best opportunities in the current
financial climate, second only to primary
strategies (70%, Fig. 15).
Fig. 13: Institutional Investors with a Preference for
Infrastructure Debt by Location
35%
31%
Proportion of Investors
30%
28%
18%
24%
25%
North America
20%
15%
18%
Europe
13%
10%
10%
Asia
5%
34%
Rest of World
24%
0%
Less than
$1bn
$1-9.9bn
$10-49.9bn
$50-99.9bn
$100bn or
More
Assets under Management
Source: Preqin Infrastructure Online
6
Source: Preqin Infrastructure Online
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Preqin Special Report: Infrastructure Debt
Fig. 14: Source of Allocation: Investors with a Preference
for Unlisted Infrastructure Debt vs. All Other Infrastructure
Investors
50%
Fig. 15: Strategies Investors View as Presenting the Best
Opportunities in the Current Financial Climate
80%
46%
70%
40%
35%
33%
30%
25%
21%
20%
23%
23%
14%
15%
12%13%
10%
7% 8%
5%
0%
Separate
Part of
Part of Real
Infrastructure Private Equity
Assets
Allocation
Allocation
Allocation
General
Alternatives
Allocation
Other
Proportion of Respondents
Proportion of Investors
45%
70%
60%
50%
40%
30%
20%
20%
17%
10%
7%
0%
Infrastructure Debt Investors
All Other Infrastructure Investors
Primary
Debt/Mezzanine
Source: Preqin Infrastructure Online
Secondaries
Fund of Funds
Source: Preqin Investor Interviews, June 2016
Fig. 16: Sample Institutional Investors with Plans to Invest in Unlisted Infrastructure Debt Strategies in the Next 12 Months
Investor
Type
Location
Investment Plans in the Next 12 Months
European Investment
Bank
Bank
Luxembourg
Planning to invest around €650mn in infrastructure in the next 12 months, including the
provision of project financing debt for economic and social infrastructure across Europe.
Whitehelm Capital
Asset
Manager
Australia
Will be investing up to AUD 800mn in direct infrastructure in the next year, with a 50:50 split
between equity and debt strategies.
Sompo Japan
Nipponkoa Insurance
Insurance
Company
Japan
Expects to make new commitments to infrastructure, allocating JPY 24bn to up to six
unlisted infrastructure debt funds in the coming 12 months.
R+V Life Insurance
Insurance
Company
Germany
Looking to invest an additional €200mn in unlisted funds, targeting both debt and equity
opportunities that provide exposure to core infrastructure assets within OECD countries.
Source: Preqin Infrastructure Online
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Infrastructure Debt
September 2016
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