Morgan Stanley and a joint venture of GE and Credit Suisse are targeting investments in public transportation, energy, utilities, and communications
Morgan Stanley and a firm set up by General Electric and Credit Suisse have raised close to $10 billion for their respective infrastructure funds.
Global Infrastructure Partners (GIP), an independent fund that invests in infrastructure assets worldwide, has raised $5.64 billion in equity commitments for its flagship first fund that will invest in the energy, transport, water, and waste management sectors. GIP was set up by founding investors General Electric Company and Credit Suisse.
Meanwhile, Morgan Stanley Infrastructure Partners has raised $4 billion in equity commitments—exceeding its initial target of $2.5 billion—for a fund that targets investments in assets that provide public goods or essential services in sectors such as transportation, energy and utilities, social infrastructure and communications.
Infrastructure funds are gaining acceptance worldwide, especially among pension funds and other institutional investors looking for alternative investments that have the potential to generate stable returns or dividends. In Asia, Thailand's Government Pension Fund plans to award $660 million in global real estate and global private equity mandates to up to 10 fund managers within the next three months; and it favours infrastructure-related private equity investments.
Adebayo Ogunlesi, chairman and managing partner of GIP, says its flagship fund provides a well-capitalised platform on which to expand the firm's portfolio. GIP invests worldwide in infrastructure assets in both OECD and select emerging market countries. It targets investments in single assets, portfolios of assets, and companies in the energy, transport, water, and waste management sectors. It has offices in New York, London and Hong Kong and operational headquarters in Stamford, Connecticut.
GIP is an investor in London City Airport, as well as port assets in the UK and Argentina and a liquid petroleum product storage facility in India. It also recently completed the acquisition of a substantial stake in Biffa, a leading UK waste management business.
Asia is of particular interest to GIP in terms of investment opportunities.
"China's sheer scale, rapid economic growth and infrastructure development imperatives make it an important area of involvement for GIP," says Ogunlesi. "Our mission of improving the efficiency of infrastructure assets to benefit all stakeholders will help China meet its infrastructure demands."
Ogunlesi notes that GIP is exploring opportunities across Asian markets in its core investment sectors of energy, transport and water and waste infrastructure.
The Morgan Stanley fund, meanwhile, raised its capital globally in North America, Europe, Australia, the Middle East and Asia. Investors include major pension funds, insurance companies, high-net-worth individuals as well as Morgan Stanley and its employees.
James Gorman, co-president of Morgan Stanley, notes that the better-than-expected result of the fundraising underscores the demand for infrastructure investments and for alternative assets that generate long-term stable cash flows.
"Infrastructure is now an important component of any asset allocation strategy. It offers portfolio diversification and the ability to invest in real assets, with uncorrelated investment returns relative to other asset classes," Gorman says.
Morgan Stanley Infrastructure now has investments that exceed $1 billion in enterprise value that have achieved higher-than-expected returns, according to Sadek Wahba, the firm's global head and CIO.
"The current challenging market conditions are creating unique opportunities in the infrastructure sector, and we are benefiting from our global footprint that is generating a strong investment pipeline across the Americas, Europe and Asia," Wahba says.
Morgan Stanley Infrastructure's investment team is located in New York, London and Hong Kong. The fund targets investments in assets that provide public goods or essential services in sectors such as transportation, energy and utilities, social infrastructure and communications. Morgan Stanley Infrastructure is part of the merchant banking division within Morgan Stanley Investment Management, which has $577 billion in assets under management.