Money managers are bulking up on staff and resources, betting that infrastructure debt will be the next big thing for investors searching for yield.
StepStone Group LP, Standard Life Investments Ltd., Brookfield Asset Management and Mitsui & Co. Ltd. added or bolstered infrastructure debt businesses in the past 18 months. Even managers with more established infrastructure credit businesses — such as Aviva Investors, Macquarie Group Ltd. and AMP Capital — have been adding staff.
Managers are following the money. Some $11.5 billion was raised for infrastructure debt funds last year, more than double the $4.5 billion raised for infrastructure debt funds in 2014, according to London-based alternative investment research firm Preqin.
Banks had been the primary lenders for infrastructure projects until recent regulations tightened restrictions on their lending business in general. As the banks have stepped back, infrastructure and other alternative investment money managers have come forward to offer financing for infrastructure projects. Infrastructure is one of several areas, including real estate and private equity, in which new providers of financing are filling in as banks continue to lend, but only sparingly.
This year through May 16, two funds raised $1.6 billion combined; there still are 27 funds aiming to raise $21.1 billion, Preqin data show.
Brookfield Asset Management is expanding into infrastructure debt with a focus on mezzanine lending, said Hadley Peer Marshall, New York-based senior vice president in Brookfield's infrastructure business.
Ms. Marshall joined Brookfield from Goldman Sachs Group Inc. in July to help the Toronto-based real asset firm expand its credit capabilities, she said. Brookfield already has a business investing on the equity side of infrastructure. The infrastructure business totals $51 billion.
“We are looking to deploy capital into mezzanine structures,” Ms. Marshall said. “Banks pulling back on leverage is leaving opportunities for private credit to play a more extensive role.”
Not only is fresh capital needed to finance new projects, but also to refinance current debt, Ms. Marshall said.