Monday, June 17, 2024

Macquarie raises record €8bn for Europe infrastructure fund

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Macquarie has raised a record of more than €8bn for its new European infrastructure fund in the latest sign of investor appetite for critical assets.

The Australian bank and investment group said its seventh Europe infrastructure fund was the largest ever such vehicle focused on the continent.

While investment groups have faced challenging conditions for raising funds as higher interest rates shift money into areas such as the bond market, there has been a revival of interest in infrastructure as businesses seek to profit from transitions to cleaner energy and supply chains that are closer to consumers.

“The infrastructure gap of what’s planned versus what’s needed is reasonably wide,” Adam Lygoe, Macquarie Asset Management’s head of institutional and international wealth distribution, told the Financial Times

“The ability to fund that by governments is challenging around the world, so the need for the private sector is there.”

January has been a landmark month for the asset class, with BlackRock, the world’s largest money manager, striking a $12.5bn deal to buy investment group Global Infrastructure Partners, making it the world’s second-largest manager of private infrastructure assets.

General Atlantic also agreed this month to acquire UK infrastructure investor Actis.

Lygoe said infrastructure was still an “emerging asset class” and that his group was also open to deals amid consolidation in the asset management industry.

Sydney-headquartered Macquarie has a total of about €170bn in real assets under management and buys stakes in the likes of Britain’s gas network and Australia’s Port of Newcastle.

Its latest European infrastructure fund — part of a strategy that dates back two decades — has already made deals in areas such as data centres, parking and utilities.

The group has drawn scrutiny for its investments in the UK’s water utilities, a sector struggling with rising inflation and high debts.

Macquarie previously invested in Thames Water before selling out in 2017 and has since taken over Southern Water. It announced last year that it was putting £550mn into the business.

Macquarie has said that during its more than decade-long ownership of Thames Water, it oversaw record funding and the group maintained an investment-grade credit rating.

Lygoe said that while the topic of its water assets can come up when investors do due diligence, 92 per cent of those in the European infrastructure fund have previously invested with Macquarie and clients appreciate the group’s public response.

The latest fund is targeting a low double-digit net internal rate of return. Investors are mainly pension funds and insurance companies but the group includes sovereign wealth funds and family offices. Macquarie is also working to bring on wealthy individuals as backers in its infrastructure funds.

About half the fund’s investors are based in Europe, the Middle East and Africa, with about a third in the Asia-Pacific region and the remainder in the Americas. The target for the fund was €7bn- €8bn.

“It’s well documented that the Australians and Canadians have meaningful allocations in this asset class but there’s other parts of the world where it’s just starting,” Lygoe said. “That increase in allocation is because the experience of folks over many years has been a good one.”

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