EUROPE - HSBC spinout InfraRed Capital Partners has raised $1.2bn (€860m) for its third greenfield infrastructure fund from pension funds, insurers and funds-of-funds.
The oversubscribed fund will invest in revenue-assured, public-private partnership (PPP) social infrastructure projects - effectively exchanging revenue risk for development risk by investing at an earlier stage of project development and passing completed assets on to be managed by investment partners.
Most infrastructure funds acquire existing assets, which means they take on operational risk, but avoid potentially costly planning and construction risks.
InfraRed will also take on additional counterparty risk by investing with multiple partners in each project.
Although the types of counterparty will vary according to the project, the number and type of partners will be fixed at the outset.
A source familiar with the fund said: "One advantage of having a number of partners is that the risks will be passed on to the people best able to deal with them."
The risks will vary from project to project, each of which will be sized at around $1m-2m, with an average development timeline of 20 years.
This is InfraRed's third from-scratch fund - which makes it one of the few fund managers to have a track record at managing additional risks.
"One thing investors were looking for was track record," the source said. "It helps."
All of the fund's assets are government-backed, and most are in developed markets - a move designed to mitigate both counterparty and political risk - with additional investment in mature Asian markets such as Singapore and Hong Kong.
Asked whether investors had been reluctant to take on early-stage risks, the source said:
"It's the role of the fund manager to understand the risks and structure them appropriately.
Each risk has its own profile, and investors will take into consideration the different risk/reward situation."