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Canadian private capital group Brookfield has raised a record-sized $28bn infrastructure fund as institutional investors plough cash into strategies they expect will benefit from higher interest rates and a shift away from globalisation.
The fund, raised by the group’s Brookfield Infrastructure Partners arm, is the largest-ever dedicated to investing in assets such as airports, toll roads, pipelines and natural gas export plants. It is also the biggest fund ever raised by Brookfield, which manages $850bn across sectors spanning real estate, credit and insurance, renewable energy and corporate buyouts.
The record haul comes as other large asset managers including Blackstone and KKR, and specialised infrastructure investors such as Global Infrastructure Partners, have raised substantial new funds or are setting ambitious goals for new funds. GIP is targeting $25bn for its latest infrastructure fund, while Blackstone has set a goal to handle more than $100bn in infrastructure.
Since last year, when central banks began to drive up global interest rates in an effort to tamp down inflation, many institutional investors have treated infrastructure as a haven from rising price trends. The assets often produce revenues indexed to inflation, even as they are financed with fixed-rate debt.
By contrast, higher interest rates have created new challenges for traditional corporate buyouts. Leading private equity firms have recently pared fundraising goals for such deals as investor enthusiasm weakens.
Sam Pollock, chief executive of Brookfield’s infrastructure investment arm, told the Financial Times that he believes a “deglobalising” world, where large companies are bringing production closer to home and sourcing their energy needs from geopolitical allies, has dramatically expanded the pool of potential infrastructure investments.
“I think there’s a huge amount of opportunity to deploy capital that should soak up any money coming in.”
The reshoring of critical industries such as energy and semiconductors to the US, Pollock said, “requires a ton of new capital to reinforce supply chains and energy infrastructure”.
Pollock also said $1tn will be need to be invested to “rewire all of the digital infrastructure around the world” with new data centres and fibre and tower communications networks.
Alternative asset managers have increasingly been helping companies to hive off large infrastructure assets in need of heavy new investment outside of their balance sheets. Brookfield has struck infrastructure investments with groups including Intel, Deutsche Telekom and Reliance Industries to build assets ranging from semiconductor fabrication plants to fibre networks and cell towers.
In the fundraising, Brookfield took in $28bn for its fifth flagship infrastructure fund, more than a $25bn goal it set when it began to raise money last year, and 40 per cent more than a prior fund raised in 2020.
Roughly 200 large institutional investors such as pensions and sovereign wealth funds contributed $21bn to the fund, while Brookfield will invest $7bn through cash on hand and the issuance of new stock. It also raised $2bn from separate vehicles that will co-invest alongside the fund, bringing the total amount of capital raised to $30bn.
