Infrastructure investment funds stay buoyant-study

LONDON (Reuters) - Infrastructure funds continued to attract new money in the last three months, with institutional investors making fresh allocations in their quest for stable, inflation-linked returns, a new study has found.

Research firm Preqin said that some $14 billion (8 billion pounds) was raised by funds holding an interim closing during the quarter, an increase of 33 percent over the previous quarter.

An interim close is held by funds at any point during the fund raising process, allowing them to invest the money raised up until then in existing infrastructure projects such as schools, roads and airports.

“Investor appetite for infrastructure funds remains strong (and) this is shown by the healthy amount of capital raised by funds holding either a final or interim close in Q3 2012, and this looks set to continue in the coming year,” Elliot Bradbrook, manager of infrastructure data at Preqin.

However, funds holding a final close, that is, reaching their ultimate target for capital, nearly halved with six unlisted infrastructure funds raising $2.7 billion, compared with 11 funds raising a total $5.2 billion in the previous quarter.

Bradbrook noted this apparent discrepancy arose because while investors were making investments in infrastructure funds, they were now taking a lot longer on their due diligence checks, making the entire fund-raising process that much more protracted.

“Funds are able to raise money but it is taking them longer to raise their targeted amount and this is why we are seeing more interim closes and fewer final closes,” said Bradbrook.

“Before the financial crisis it could have taken just 12 months to launch and close a fund but now it can take up to 24 months for the whole process,” he added.

142 unlisted infrastructure funds are currently in market, targeting $91.6 billion in investor capital, Preqin said.

Some 51 percent of these funds have held at least one interim close, having raised an aggregate $29 billion of their overall targets.

Global Infrastructure Partners II remains the largest infrastructure fund currently in market, holding its third close of $7.5 billion in July 2012, Preqin said.

Editing by Greg Mahlich