Infrastructure equity fund sees £1bn close with institutional inflows

Infracapital has closed its third fund after commitments reached more than £1bn (€1.3bn), with investments announced in three infrastructure entities.

The infrastructure specialist, part of M&G Investments, said commitments to the fund came mainly from insurance companies, one of which is parent company Prudential.

Almost one-third of the capital has been invested by public and private pension funds, with geographical inflows showing more than 40% coming from UK institutions and 28% from German institutions.

Nearly half of the capital invested in its latest fund came from existing clients.

The active equity company said it had already begun allocating capital, investing more than £350m in three separate infrastructure companies.

It acquired Affinity Water, a UK water company, from French conglomerate Veolia, and also purchased Falbygdens Energi, a Swedish district heating and electricity distribution company, from Gothenburg’s municipality council.

Infracapital said it had 63% of the capital in its third fund left to invest and would seek assets across Northern and Southern Europe, ensuring sector and geographical diversity.

It will target infrastructure deals worth less than $1bn (€790m), where it sees around 90% of activity in the market as a whole.

Only 11% of deals in the $300bn market are valued at more than $1bn, it said.

Head of Infracapital Martin Lennon said the close of the fund demonstrated the value of infrastructure for insurance companies and pension funds.

Ed Clarke, director, added: “The fund has had a strong start, and we are pleased with the companies already acquired, including our first in Sweden.

“The European infrastructure sector continues to provide opportunities for us to create value by assisting management to develop and enhance their businesses for customers and other stakeholders.”

The manager will focus on Europe, where around 46% of all infrastructure investments have originated since 2008.

It said Northern Europe would be fuelled by governments’ requirements to fund vital infrastructure projects, whereas the Southern market offered more opportunistic investments due to structural changes and reforms.