Global Infrastructure Partners (GIP), a New York-based fund manager, is in the process of raising a debt fund that will invest in the infrastructure sectors GIP currently targets – energy, transportation, and water / wastewater – PDI sister title Infrastructure Investor was able to confirm.
The debt fund, which according to several sources is close to reaching a first close and is targeting $2.5 billion, will invest in greenfield and brownfield assets.
Steve Cheng and Reiner Boehring will manage the debt fund. Cheng and Boehring, both debt specialists and investment principals at GIP, were previously co-heads of global project finance at Credit Suisse.
A spokesperson for GIP declined to comment.
Investment consultants and other fund managers have emphasised the importance of infrastructure debt, predicting it is on its way towards becoming an established asset class. The reasons cited are primarily changes in the regulatory environment, particularly Basel III, that make project financing less attractive to banks; and low interest rates that have led to bond markets no longer holding the same appeal for institutional investors.
While this is GIP’s first debt fund, the firm – headed by Adebayo Ogunlesi – has already raised two infrastructure equity funds. Its first fund closed on $5.64 billion in May 2008, while Global Infrastructure Partners II closed in 2012 on $8.25 billion, making it the largest infrastructure fund ever raised (an achievement that has not been eclipsed since).
It is not unprecedented for infrastructure fund managers to have both equity and debt strategies. For example, AMP Capital raises equity funds and is also currently raising its second debt fund, which had reached $750 million earlier this year on its way to a $1 billion target. Fellow Australian fund manager IFM Investors has around A$14 billion (€10 billion; $13 billion) under management overall, including A$2 billion in infrastructure debt. The likes of Macquarie and Hastings Funds Management also have debt strategies.
GIP currently has 12 portfolio companies, including renewable energy company Terra-Gen Power Holdings, Gatwick Airport, and container terminal operator Terminal Investment Limited. Although GIP also focuses on water/wastewater, it currently does not have any investments in the sector.
Earlier this month, GIP sold its remaining stake in Access Midstream Partners, a midstream natural gas and liquids infrastructure company, to existing shareholder Williams Partners for $5.995 billion.
Last year, it sold its near-27 percent interest in Australia’s Port of Brisbane to Canadian pension fund manager La Caisse de Dépôt et Placement du Québec.
Headquartered in New York, GIP also has offices in London, an affiliate office in Sydney and a portfolio company operations headquarters in Stamford, Connecticut. It currently has approximately $18.7 billion in assets under management and was ranked third in last year's Infrastructure Investor 30 – a ranking of the largest global investors in infrastructure – behind Macquarie Infrastructure and Real Assets and Brookfield Asset Management.