Infra Fundraising Records
I’ve seen in the news some massive infrastructure funds raised the past couple weeks with the latest being today’s announcement of GIP raising a record $25bn. That along with Stonepeak’s $14bn last week and Blackstone’s additional $7bn makes me curious, how does this effect the market? Does all this dry powder start to go towards bidding wars and we see inflated asset prices? Were these massive fund sizes expected? Are they expected to get even bigger?
Don’t work in PE or infra so I’d be curious to hear some of the PE veterans opinions on this.
Thanks.
To your first question, short answer is yes. Returns across the infra spectrum have come down (similar to broader PE) and the proliferation of evergreen funds with no time horizon in conjunction with increased broader competition have basically precluded a lot of the big infra guys from chasing traditional core and core plus assets. Basically if there isn't some heavy development risk or other type of hair associated with the asset, it's really hard to be successful IMO. I spent time at one of the big infra players and we were chasing all sorts of riskier/speculative stuff (some of which was arguably not even infra).
I think it's been really easy to raise these funds just given increased LP allocations to PE as an asset class + the amount of interest in renewables. I do think there are pockets of infra that may still be untapped like hydrogen fuel but very curious to see where capital is deployed over the next 5 years.
Thanks for the response. Are those pockets you mentioned mostly targeted by the core plus/value-add investors? That makes intuitive sense to me since the technology isn’t proven and the bank and capital markets wouldn’t be as comfortable but again, don’t work in infra or PE.
I wouldn’t even call those pockets core plus, more like value-add/opportunistic. Interesting that GIP raised a dedicated core vehicle because I know that they’ve historically done those core/core plus deals through ad-hoc side vehicles outside of any large fund.
Interesting timing of this thread as GIP announced targeting a new $25bn flagship fund with another $5bn fund specifically focused on lower return core assets.
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