Originally published in ReNew Canada,
The Macquarie Group, headquartered in Australia, was one of
the first to recognize the opportunity for private sector
investment in infrastructure assets back in 1996. Now, more
than 10 years later, this trend is exploding.
Private equity firms are establishing specialized
infrastructure funds or groups. Goldman Sachs has committed
more than US$6.5 billion in capital to its first infrastructure
fund. The Carlyle Group has raised its first US$1.2 billion
infrastructure fund, which will invest in transport and water
projects in Canada and the U.S. Carlyle also formed a US$685
million renewable energy infrastructure fund with Riverstone
Holdings. Morgan Stanley established an infrastructure group
and announced that it was establishing an infrastructure fund.
In February 2007, it agreed to acquire a significant interest
in two Montreal container terminals. GE and Credit Suisse
announced that they intend to establish a US$1 billion joint
venture, Global Infrastructure Partners, to invest in
infrastructure assets, and JPMorgan also established its own
In Canada, Brookfield Asset Management recently formed its
dedicated infrastructure fund, Brookfield Infrastructure
Partners, and seeded it with some existing assets.
It's not just big investment banks and asset managers
looking for opportunities in this sector. Alinda Capital
Partners, an independent, U.S.-based infrastructure fund
managed by a group of former Citigroup employees, recently
acquired UE Waterheater Income Fund in Canada.
Infrastructure funds will also be competing with another
class of investor—pension funds. The infrastructure
asset class offers long-term, inflation-indexed returns, which
typically demonstrate stability over time—perfect for
pension plans. Since 1999, Borealis Infrastructure has been
identifying and managing infrastructure assets on behalf of
OMERS (Ontario Municipal Employees Retirement System). Ontario
Teachers' Pension Plan has been investing in infrastructure
assets since 2001, and the CPP (Canadian Pension Plan)
Investment Board formed an infrastructure group in 2006.
The growth of infrastructure funds, a trend that accelerated
last year, will continue in 2008 and beyond. Private equity
firms, seeing the success of other investors, will likely form
their own specialized infrastructure funds or groups.
Most current infrastructure and pension funds focus on
existing assets in OECD countries, but with more funds being
raised and competition for infrastructure assets intensifying,
these funds may look beyond the traditional definition of
infrastructure to assets that have infrastructure-like
characteristics and returns. Financing greenfield or brownfield
developments might become the new trend.
As the trend grows, infrastructure funds will need to search
further and wider afield for investment opportunities,
including in emerging markets. Evidence of broadening horizons
can be seen in the recent establishment of infrastructure funds
focused solely on India by Blackstone Group, Citigroup and JP
Morgan, among others.
Billions of dollars have been amassed to invest in
infrastructure assets. Canada, with its stable government and
low political risk, is well-positioned to continue the
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