Wednesday, June 12, 2024

Demand grows for infrastructure debt

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Private debt investors are showing a growing interest in the infrastructure sector, to help fund a proliferation of decarbonisation projects in need of capital.

In turn, this investor sentiment has been driving greater development of infrastructure capabilities among private credit asset managers.

Bridgepoint head of direct lending Andrew Cleland-Bogle said he has seen clear signs that investors are developing a greater interest in infrastructure.

“Currently I am hearing LPs, when I speak to them, talk about infrastructure more and more,” he said. “There’s definitely more interest in infrastructure as an asset class.

“There are lots of reasons for that. One is the growth that will come in infrastructure investing as a result of global decarbonisation. Focusing on areas like that is a huge opportunity for a lot of people. The forecasted investment in that space is expected to reach $9tn (£7.1tn) a year through 2050. It has been growing and there’s no reason to think that won’t continue.”

Read more: Decarbonisation poses big opportunity for private markets

In September 2023, Bridgepoint announced its planned $20bn acquisition of North American infrastructure investor Energy Capital Partners (ECP) which has raised more than $30bn of capital since inception in 2005.

ECP is particularly focused on the energy transition sector, power generation, renewables, battery storage, environmental infrastructure and sustainability sectors.

And last month, Principal Asset Management announced the launch of its new private infrastructure debt capability, hiring MetLife veteran Mansi Patel to lead the new team.

Principal said the new unit would focus on thematic investments in globalisation, decarbonisation, and electrification.

“The launch of our private infrastructure debt capability comes at an opportune time for investors, given the powerful market forces driving tremendous capital needs across all infrastructure sectors,” Todd Everett, global head of private markets, said at the time.

Meanwhile, private credit giant Ares Management published a white paper on infrastructure debt in February which pointed to the “long-term, durable market tailwinds of the asset class”.

Read more: Net zero guidance published for private debt sector

“Global infrastructure investment is expected to exceed $3.7tn a year through 2035, with a total gap of $5.5tn over the same period that is expected to be funded by private investors, whether via debt or equity,” Ares said.

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