BlackRock infrastructure debt fund to focus on core EU countries

BlackRock’s European infrastructure debt fund will focus primarily on ‘essential publically supported infrastructure’ in the UK, Germany, France, Benelux countries and Scandinavia, the company’s new London-based head told PropertyEU.

The new unit of the New-York based asset management giant will be headed up by Philippe Benaroya and Chris Wrenn as well as Gilles Lengaigne, who have worked as a team for more than 10 years, latterly at rival Blackstone’s $55 bn (EUR 42.3 bn) private debt management unit, GSO.

The types of infrastructure targeted include transportation, some utilities, hospitals and universities, Wrenn said. ‘This is being driven by the pipeline of infrastructure projects across Europe that needs to be financed in upcoming years.´

BlackRock has not disclosed its loan target for next year but will be ‘very flexible’ in terms of the size of loans it underwrites, Wrenn added. The asset manager is aiming for a return of between 2.5% and 3% above the base rate in each country, he added.

Interestingly, despite the scale of BlackRock’s operations in the US, it does not have a similar division to the one it has just set up in the UK. The move is in response to ‘institutional client demand to channel capital into new-build infrastructure projects and secondary loan investments’ as they search for better yields against a backdrop of historically low interest rates, BlackRock said. Essentially, the division will take money from BlackRock's insurer clients and lend it to public infrastructure projects.

Infrastructure is fast becoming one of the most popular asset classes for long-term investors such as pension funds and insurers because they have defined liabilities that they need to match with long-term, inflation-linked debt assets. Subsequently, infrastructure, as a long-term play, is a good match.

‘If you look at where we are in the cycle, many banks are getting even more constrained with their lending. Now, other players are stepping in, such as insurers,’ Jörg Schürmann, managing director and head of debt advisory for the EMEA region at JLL in Frankfurt, told PropertyEU. ‘When I talk to insurers, I see that a lot of them are keen to follow players like Allianz into the debt market. Today, a lot of debt funds are either fundraising or already providing equity,’ he added.