Brookfield Raises Largest $14 Billion Infrastructure Fund

  • Firm took nine months to raise money, will target big deals
  • About a quarter of committments came from Asian investors

Brookfield Asset Management Inc. raised $14 billion for its latest infrastructure fund, topping its target, as Canada’s largest alternative asset manager goes on the prowl for larger acquisitions.

The pool, known as Brookfield Infrastructure Fund III, will be the largest private infrastructure fund ever raised in the industry, according to a statement from Brookfield, and data compiled by Bloomberg. Its original target was $10 billion.

It took the Toronto-based firm nine months to raise the money, according to Sam Pollock, the head of Brookfield Infrastructure Partners, the company’s publicly traded infrastructure arm. That’s a month longer than it took its predecessor, which closed in 2013, to amass $7 billion, despite the new fund being twice as big.

Including the latest fund, Brookfield has raised $27 billion in the past 18 months for its property, renewable energy and private equity subsidiaries, underscoring surging demand for investments outside volatile equity markets and bonds, where yields have sunk to record lows.

“I realize that it probably seems large to the outside world,” Pollock said in a phone interview. “But given the amount of deal flow that we’ve seen and the fact that the transactions are larger, it’s actually the perfect size for us.”

The firm committed $4 billion of its own money to Brookfield Infrastructure Fund III, according to the statement.

Brookfield Asset Management rose 1.3 percent to $34.58 in New York Tuesday at noon. Brookfield Infrastructure Partners rose 0.7 percent to $46.54.

Brookfield’s fund may not be the largest for long. Global Infrastructure Partners LP is seeking as much as $15 billion for its third flagship fund, people familiar with the matter said in November.

Asia Investors

Brookfield Infrastructure Fund III attracted about 80 new institutional investors, in particular from China, Japan and South Korea, Pollock said.

“We would have had one or two really large investors in fund one or fund two,” he said. “Now, both the number and the scale of capital coming from Asia is much more significant. It’s probably almost a quarter of our fund.”

Pension plans are also allocating more money to infrastructure, he said. Brookfield is targeting an internal rate of return of more than 13 percent from its investments, Pollock said.

“These assets are basically the backbone of the economy, he said. “One day, it wouldn’t surprise me if the infrastructure sector as a whole was bigger than the real-estate sector.”

Big Acquisitions

The larger fund size will give Brookfield, which has $240 billion in assets under management, the capital it needs to chase big acquisitions, Pollock said.

Brookfield and its partners agreed in March to acquire Australian rail and port company Asciano Ltd. for A$9 billion ($6.8 billion). The firm is also leading a group of investors in exclusive talks to acquire an 81 percent stake in a natural gas pipeline network being sold by Brazil’s troubled state-run oil company, Petrobras, which is expected to fetch nearly $6 billion. 

A typical transaction in the previous fund would be less than $1 billion, Pollock said. The new fund will invest in a handful of deals valued at more than $1 billion apiece, he said. It has already committed more than $3 billion, according to the statement, including to a portfolio of U.S. hydroelectric facilities and a Colombian power generation company.

A push to privatize infrastructure assets in regions such as South America and Australia has helped create bigger targets, Pollock said. He’s hopeful that the Canadian government will adopt a similar policy, as Ottawa rethinks how it can court private firms to encourage invest in the country’s infrastructure.

“Governments realize they don’t have the capital to invest in their infrastructure,” Pollock said. “They need new sources of capital and I think it has been widely recognized that the private sector not only has the capital to fund it, but also to improve the asset,” he said.

Brazil Opportunities

Brookfield is seeing big opportunities in Brazil, where the political and economic situation is putting some “once-in-a-lifetime” assets on the block, Pollock said. North American midstream oil and gas assets, including pipelines, processing plants, and other assets, are also on the firm’s radar, having dropped in valuation due to the oil price rout.

“It’s a large market and up until 12 months ago, we just couldn’t find value there,” Pollock said. “With the change in oil prices and just the reevaluation of the cash flows in the business, it became re-rated and values have come down dramatically,” Pollock said. “That will be a place where we’re going to invest a great deal of capital.”

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