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Asset Management
Infracapital closes first greenfield infrastructure fund
Eighty-five percent of capital committed from pension funds and insurance companies
The Asset 23 Nov 2017

INFRACAPITAL, the unlisted infrastructure equity investment arm of M&G Investments, has reached the final close of its first Greenfield Fund, with total commitments of 1.25 billion pounds sterling (US$1.66 billion). This is well in excess of its one-billion-pound target and in line with Infracapital’s internal hard cap.

The fund’s strategy is to invest in the later stages of development, construction and expansion phases of projects and companies across a variety of sectors including communications, energy, renewables, social infrastructure, transport and utilities.

In Asia, M&G has seen strong demand from institutional investors for infrastructure investments, both in the form of equity and debt.

“Large asset owners in Asia, particularly in Japan and South Korea, continue to place capital overseas to diversify portfolios and seek higher yields. Greenfield infrastructure investment, in contrast to already-operational ‘brownfield’ infrastructure, offers an early entry point to the ownership of infrastructure, typically at a higher return with a steady yield over the very long term,” says Marcel de Bruijckere, director of institutional business, Asia-Pacific, M&G Investment.

The fundraising saw significant demand from institutional investors, with 85% of the fund committed by pension funds and insurance companies. The fund also attracted new investors from new geographies, with 50% of the capital coming from international investors.

Andy Matthews, head of greenfield, Infracapital, says, “The investments we are making on behalf of our clients in greenfield infrastructure play a significant role in updating or delivering new services across the UK and Europe. For example, our significant investment into Gigaclear is helping to deliver an ultrafast broadband network to hundreds of thousands of homes in rural Britain.”

“We have made great progress and have already created a diversified portfolio of five investments by deploying seed capital. We continue to see significant opportunities for new investment in both the UK and Continental Europe, and expect the fund to be over 50% committed by the end of the year.”

Martin Lennon, head of Infracapital, says, “It is natural to see pension funds and institutional investors increasing their allocations to infrastructure as it has long been seen as an asset class that can provide long-term, predictable and often inflation-linked income. This latest capital raising demonstrates that there is appetite from many investors to access projects at an earlier stage, providing the usual characteristics investors are attracted to but with a different return profile.

Infracapital has already committed 43% of the Greenfield Fund in five assets:

• Gigaclear, a broadband developer providing high-speed fibre optic broadband networks to the UK’s underserved rural communities.
• Bioenergy Infrastructure Group (BIG), a UK biomass and Energy from Waste aggregation platform with potential generation capacity in excess of 100MW.
• C2i, a diversified portfolio comprising five social infrastructure assets in Italy, providing core public services in the health, transport and security sectors.
• Infram Energy, a joint venture with Amarenco Solar to invest in greenfield renewable energy assets across France, Ireland and other European markets.
• Nexera, a joint venture with Nokia to invest in a Polish government sponsored initiative to roll out broadband infrastructure in the country.

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