IFM Investors has raised almost $500 million for its first debt fund dedicated to U.S. infrastructure even as the Trump administration has yet to move ahead with its own infrastructure plan.
IFM is seeking to raise about $500 million a year for an open-ended fund that will target senior-secured, floating rate loans in the sector, according to Rich Randall, its global head of debt investments. The firm, owned by 27 Australian pension funds and with about $80 billion in assets under management, has secured commitments for the debt fund from the Kentucky and Virginia retirement plans.
While President Donald Trump has promised to rebuild America’s crumbling infrastructure, the White House has said no action on a bill is likely this year. Institutional investors, however, are forging ahead, raising billions of dollars for deals in the arena. Blackstone Group LP has lined up $5 billion for its inaugural $40 billion infrastructure fund, Bloomberg News reported in June. Other firms including Carlyle Group LP, 3i Group Plc and Global Infrastructure Partners are also in the throes of raising dedicated funds.
Waiting for U.S.
“As we wait for formal U.S. federal financing to materialize, the private sector is taking action to raise funding, partner with all levels of government and build and improve infrastructure across the U.S., an initiative that benefits all stakeholders,” Randall said in an e-mail. There’s “significant demand” from institutional investors for private credit strategies that provide diversification and yield, he added.
IFM manages $5 billion in infrastructure debt outside the U.S. It also has more than $30 billion in equity positions in the sector globally. Its assets include the Indiana Toll Road, which operates 157 miles of highways linking Chicago and Ohio with the Northeast; and Manchester Airports Group, the owner and operator of three U.K. airports, including London Stansted.
Equity and debt tied to infrastructure assets is attractive as it can withstand economic cycles and offer predictable revenue streams. Such debt has also experienced lower average cumulative default rates and higher recovery rates, according to an IFM presentation to the Kentucky Retirement Systems.
Infrastructure debt “offers the potential to generate premiums above comparable corporate credits with lower risk of loss,” Randall said.