Originally from: PEI Infrastructure Investor
Published: 31 March 2017
By: Andrew Vitelli
There is plenty of capital to be raised from Asia, managers say. But fundraising there requires a lot of legwork.
When fundraising in a market like the US, a strong track record and a solid reputation go a long way to bringing interested investors on board. But things are different in Asia, where personal relationships and trust are paramount and persistence is key.
Breaking into the Asian market takes time, OECD managers say. It takes patience and perseverance. It means making annual trips east to build a rapport with investors. But for those willing to do the legwork needed to break through, the opportunity is plentiful.
“It’s a market that is very difficult to penetrate,” Mathias Burghardt, the head of infrastructure for Ardian, tells Infrastructure Investor. “But once you are there and you have delivered what you have promised, they are very loyal.”
The importance of Asia as a fundraising destination is growing, managers say. Ardian’s €2.65 billion Infrastructure Fund IV, which closed in January 2016, raised 20 percent of its capital from the continent, more than double the total amount of its previous fund.
“The Asian market has discovered infrastructure as an asset class,” Burghardt says. “And it really fits their needs. It’s quite a low-risk asset class with current yield and they need that for their pension plans or their life insurance programmes.”
Brookfield Infrastructure Partners, which closed on a then-record $14 billion fund last year, told Infrastructure Investor at the time that around 20 percent of the capital came from 20 Asian investors. That percentage was “substantially higher” than seen in previous funds and next time, the firm believes, Asia could comprise as much as half its capital.
Vincent Levita, the founder and chief executive of Paris-based InfraVia Capital Partners, said his firm began fundraising in Asia for its third fund, which closed last year at €1 billion. He visited the region each of the past two years, and though he has not begun raising Fund IV yet, he plans to go again in 2017 to keep up the momentum and continue building relationships. “I am a huge believer in this market,” Levita tells
Infrastructure Investor. “We have spent a lot of time there and we have been quite successful, but I am expecting a lot more in the future.”
But like Burghardt, Levita does not downplay the challenges. Building trust takes time, as does identifying the right investors. And while investors are ready to commit serious capital when a fund is the right fit, the decision-making process is not always rapid.
Emerging markets
While opportunity is present across Asia, the market is far from homogeneous. Japan and Korea may be the most established fundraising destinations, with ties between the countries’ investors and OECD managers deepening in the past decade.
“Japan was particularly pleasing for us because it takes a long time to gain the trust of Japanese investors,” Mark Crosbie of Antin Infrastructure Partners, which in December closed on a €3.6 billion fund, said earlier this year. “We put in a lot of work with our previous funds and I think it finally started to come through in terms of Japanese investors.”
But South-East Asia also represents a growing market, with Singapore and Malaysia emerging as sources of capital. Investors in the sub-region are “extremely sophisticated” and “surprisingly advanced and very knowledgeable [about] the asset class”, Levita notes.
China is still in its earlier stages as a fundraising market than some of its neighbours, but it represents a potential behemoth as a source of capital.
Overall, Asian investors tend to be conservative, which makes infrastructure well suited for their needs. The market may just be catching up to some of its OECD counterparts, but the opportunity is already too big for fundraisers to ignore.