Infrastructure Investment Speeds Up
Morgan Stanley and Global Infrastructure Partners are latest to raise investment vehicles for the space.
May 12, 2008
The infrastructure investment business shows little signs of slowing as one general partner after another raises a new multi-billion dollar fund, underscoring the promise institutional investors see in infrastructure within the US, Europe and Asia.
On Monday, Morgan Stanley announced it had closed on $4 billion for its Morgan Stanley Infrastructure Partners vehicle, exceeding its initial $2.5 billion target, while Global Infrastructure Partners (GIP) said it had raised $5.6 billion for its new worldwide infrastructure asset fund.
Investors in the Morgan Stanley fund included pension funds, insurance companies, high-net-worth individuals as well as Morgan Stanley and its employees, whereas Credit Suisse and General Electric each invested $500 million in the GIP fund.
Morgan Stanley’s infrastructure team manages its investment operations from offices in New York, London, Hong Kong and Beijing. The team will invest the fund in infrastructure assets within the transportation, energy and utilities, social infrastructure and communications industries.
Separately, GIP’s professionals manage the firm’s investment activities from offices in Stamford, Conn., New York, London and Hong Kong, and will look to invest the fund globally, including in emerging market countries.
Morgan Stanley’s fund bid $563 million for a 99-year lease in a deal involving Chicago’s underground parking system in December 2006, according to data from a recent Mayer Brown presentation on infrastructure investing.
Infrastructure funds aim to invest in a wide range of assets including airports, bridges, energy, highways, sports, railways and water treatment facilities. In the US the funds will typically invest in aging infrastructure, whereas in emerging market countries like China and India capital can be used to build out certain infrastructure like highways.
Sadek Wahba, chief investment officer and global head of Morgan Stanley Infrastructure, said the firm’s infrastructure investments amount to more than $1 billion on an enterprise value basis, and “have achieved higher than expected returns.”
The new GIP fund, which will invest in single assets or a portfolio of assets in the energy, transportation, water and waste infrastructure assets, “affirms the market’s approval of GIP’s disciplined approach to infrastructure investing,” said Adebayo Ogunlesi, chairman and managing partner of GIP.
GIP has deployed capital in London City Airport, port assets in Argentina and the UK, and a liquid petroleum storage facility in India. It also completed the purchase of a stake in UK waste manager Biffa.
GIP’s infrastructure fund was advised by Mayer Brown, which is hosting an upcoming infrastructure investing presentation in Chicago on May 21. The law firm held a similar event in New York on May 7. Mayer Brown attorneys Kathy Walsh, Alan Van Dyke, Jim Carlson and Lennine Occhino worked with GIP.
Infrastructure investment vehicles have raised more than $100 billion, according to Mayer Brown, and Morgan Stanley and GIP join a host of other high-profile investors in the space, including AIG Investments, Goldman Sachs, Highstar Capital, The Carlyle Group and Macquarie Infrastructure.
Infrastructure funds typically seek targeted returns ranging from 10% to 15%, compared with leveraged buyout funds that generally aim at 20% to 30% internal rates of returns.
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