BlackRock’s (NYSE:BLK) $1.67 billion capital raise for its Global Infrastructure Debt Fund is the latest sign of investor confidence in real assets. The fund aims to offer bespoke financing for sponsors and other borrowers developing assets with sub-investment grade credit quality.
The deal comes months after KKR was reported to seek $12 billion from investors for its newest infrastructure fund, a massive target given its previous raise closer to $7 billion. KKR had over $11 billion in commitments to its first three Global Infrastructure Investors funds as of the end of the first quarter, with much of them already invested.
Bank and government funding for infrastructure projects have hit regulatory and budgetary headwinds, creating an opportunity for private funds, BlackRock said.
Roads, water treatment and power plants generate reliable returns irrespective of market growth that could appeal to investors. Sector tailwinds remain robust. Should President Biden’s American Jobs Plan become law, the sector will have access to $56 billion of federal spending to upgrade rural and aging water systems, with more capital for roads and bridges. Water treatment deals could be particularly attractive as Clayton Dubilier & Rice’s sale process for Solenis puts a valuation comp on assets in the sector.
Alongside traditional infrastructure plays, BlackRock’s fund will target data infrastructure as companies seek to nationalize sensitive information flows, it was reported. The emphasis on data storage real estate echoes deals like QTS Realty Trust’s recently announced $10 billion sale to Blackstone. Data storage infrastructure should prove an increasingly attractive theme for large companies in search of regional hubs.
Like many recent fundraisings, BlackRock’s was oversubscribed. Contributions came from more than 20 institutional investors across the globe.
Just as notable as the fundraising is the $150 million garnered for co-investments. Investors looking to put capital to work in deals directly are clamoring for opportunities to deploy cash alongside general partners; in a timely analog, it would seem that debt investors plan to do the same.
With credit markets increasingly open to infrastructure investments and private equity fundraisings keeping apace, the sector could be in for a dealmaking bonanza.