AMP Capital expands infrastructure debt offering
AMP Capital has launched a second infrastructure debt fund for institutional investors in response to growing global demand for the asset class.
The new AMP Capital Infrastructure Debt Fund II (IDF) will invest in subordinated debt of infrastructure assets in the essential services of water, gas, electricity and transportation in Europe, North America and Australia.
The launch comes on the back of increased demand from investors in Asia, Europe and North America and the success of the first IDF fund in the range, launched in late 2010.
AMP Capital has also appointed a new director in the infrastructure debt team, Patrick Trears, in response to increasing investment opportunities. He will be based in New York, covering the fertile North American market.
Trears joins AMP Capital from WestLB where he was responsible for project and acquisition finance transactions in the Americas. He will report to Andrew Jones, AMP’s global head of infrastructure debt.
Jones says: “Significant growth in demand for infrastructure investment in developed markets combined with the attractive market environment and strong deal flow makes it an opportune time for us to launch a second fund.”
The manager aims to raise $1bn for the new fund, following the successful closure of its first IDF in June with €400m raised from 30 global institutional investors. IDF I has so far invested €218m in six subordinated loans in Europe and North America.
Dr Arjuna Sittampalam, research associate with EDHEC-Risk Institute agrees that the long-term nature of this asset class is a natural fit for such institutional investors as pension funds.
However, he notes that in Europe infrastructure typically accounts for less than 3% of their allocations, much lower than the 10% in Canada and Australia.
In his view, the obstacles in the way of increasing allocation to the asset class are the fragmentation of the pension scene in Europe, regulatory constraints, the scarcity of project finance and lack of supply.
But with political support, Sittampalam believes the sector still has significant growth potential.
Not all the benefits will be absorbed by the asset management industry, but he expects that “there is every chance that [its] exposure to infrastructure might amount to at least a few trillion dollars over the next decade or so.”
Compared to the total size of the global wealth industry, which stands at around $100-150trn, this is a relatively sinificant part of the pot.