BlackRock Real Assets has closed its first comingled fund for higher-yielding infrastructure debt, more than tripling its target to close on $1.67 billion.
The Global Infrastructure Debt Fund, which includes $150 million of co-investment capital, was launched in 2019 and is targeting returns in mid-to-high single digits, Jeetu Balchandani, BlackRock’s global head of infrastructure debt, told Infrastructure Investor. The fund was initially targeting $500 million, which Balchandani said was due to this being BlackRock’s inaugural fund in the space.
“I was very surprised to see where we ended up, which is testament to a couple of key forces going on today,” he added. “The low interest rate environment has driven a lot of investors to consider higher-yielding products, but at the same time staying safer than the lowest part of the equity capital structure. They’re stepping down from investment grade but staying in fixed income and an asset class that has demonstrated lower probability of default and a higher recovery.
“We did not have a hard-cap. There were investors who had questions about how large the fund would be, but none were really concerned about the size.”
Fundraising was also helped by the effects of the pandemic, with BlackRock having raised about $250 million prior to the outbreak last year.
“The resiliency of the asset class has been demonstrated through the pandemic. That has been demonstrated across the industry,” said Balchandani, although the theme of oversubscribed demand for such products is not only prevalent in infrastructure.
“Those forces have broadly impacted private markets in general. We’ve seen a number of our fundraises exceed targets. We’ve seen it across the platform,” added Anne Valentine Andrews, who became BlackRock’s global head of real assets in April. A case in point is the firm’s Global Renewable Power Fund III, which closed in April on $4.8 billion, almost double its $2.5 billion target.
GID has so far made four investments in the power and energy sectors in the US and Latin America, and is close to sealing its fifth, according to Balchandani. Investing predominantly in OECD countries, BlackRock said the vehicle secured commitments from more than 20 investors in the US, Canada, Japan and South Korea, with a large presence from US insurance companies.
“[European investors were] mainly in the investment grade space and in terms of currencies, they were looking at euro-based investments,” explained Balchandani.
The close means that infrastructure debt now represents a quarter of BlackRock Real Assets’ $63 billion assets under management. The group had previously invested about $800 million in the higher-yielding space targeted by GID, although this was made through separately managed accounts.
“We started investing in infrastructure debt very early on. This high-yielding fund is a missing puzzle piece,” said Andrews.