Syncora Holdings Ltd. (fka SYCRF)

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committed about $52 billion to private infrastructure funds this year, the highest annual total ever, according to Preqin
http://www.wsj.com/articles/blackstone-explores-infrastructure-business-amid-record-year-for-these-funds-1481561318



By RYAN DEZEMBER
Updated Dec. 12, 2016 2:29 p.m. ET
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Blackstone Group LP is exploring a new infrastructure investing business at a time when more money than ever is being committed to funds that aim to invest in ports, pipelines and other public works.

Big investors such as pension funds, insurance companies and wealthy families have committed about $52 billion to private infrastructure funds this year, the highest annual total ever, according to Preqin. The data provider says the amount of ready-to-invest money in such funds has risen to $144 billion and counting.

Several large investment firms, including Carlyle Group LP and Global Infrastructure Partners, are raising new multibillion-dollar infrastructure funds and investment giant Blackstone may soon join them. Blackstone has invested in cell towers in the U.S. and Brazil, built natural gas export terminal in Louisiana and a power line from Quebec to New York and even constructed a hydroelectric dam in Uganda using cash from its energy and special situations funds. Now its executives are exploring adding a unit that would take on more of those types of projects, according to a person familiar with the matter.

The rush of cash into these funds coincides with the election of Donald Trump, who has promised to boost private investment in U.S. infrastructure. But it is unclear whether the president elect’s plan to entice more investment by trimming taxes can help bring about the sort of public works program that many imagine even with Wall Street sitting on a mountain of money with which to invest.

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Investors and fund managers say that much of these funds will continue to flow to the oil patch, where the shale-drilling boom necessitated a massive overhaul of the energy supply system. Lately, the price slump has prompted oil and gas producers to shed assets—often pipelines and other assets that aren't central to the business of finding and extracting fuel but are sought after by infrastructure funds for their steady returns.

Other types of infrastructure deals have met mixed results. Toll roads have proven particularly fraught, with debt-loaded deals and traffic projections that never materialized after the housing bust resulting in a rash of bankruptcies. Carlyle reaped profit renovating rest stops in Connecticut and flipping the owner of three water systems, even though the Montana city served by one of them sued the firm to take control via eminent domain.

Still, the president-elect’s promises to boost the economy by promoting public-works programs has given investment firms a fresh pitch.

“The headlines around Trump and infrastructure spending will provide exactly what managers want in terms of a headline and a narrative around raising more money for infrastructure,” said Christian Busken, who advises private-fund investors such as endowments as real-asset research director at Fund Evaluation Group.

At an investor conference in New York days after the election, executives from major investment firms said they expected deal activity to ramp up in a Trump administration. “This is just more wind in the sails,” said Glenn Youngkin, operations chief at Carlyle, which people familiar with the matter say is seeking about $2.5 billion for a new infrastructure fund.

The bankruptcy of a waste recycler dragged annualized returns on Carlyle’s first infrastructure fund down to 1% after fees. Between the weak performance and the Montana eminent domain fight, Carlyle executives said they would stick mostly to energy assets in the next infrastructure fund, and, like many of their competitors, broaden their hunt for deals beyond the U.S.

The median return after fees from infrastructure funds launched between 2004 and 2013 have ranged from 5.7% for those that began investing in 2007 to 14.4% for 2004 funds.

Fairly reliable returns that sometimes outperform the stock market drew big interest for the latest batch of funds. Canada’s Brookfield Asset Management Inc., which invests in 19 countries around the world, including the U.S. where it owns about 140 hydropower plants and ports in Los Angeles and Oakland, this summer raised $14 billion for the biggest fund ever dedicated to infrastructure.

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Global Infrastructure Partners, or GIP, may soon take Brookfield’s title. It has been raising a fund that it has told investors could reach $15 billion, according to people familiar with the matter. GIP is led by Adebayo Ogunlesi, a Goldman Sachs Group Inc. board member who, along with Blackstone chief Stephen Schwarzman, is one of the business leaders Mr. Trump named last week to a presidential advisory group.

GIP’s returns have been among the best in the sector. The Maine Public Employees Retirement System says that through June 30, it had earned 16.2% and 24.2% annually after fees in GIP’s first two funds, respectively. Domestic pipelines have been GIP’s bread and butter, but it has also invested abroad, including in the Port of Melbourne in Australia and London’s Gatwick Airport.

A big reason privatization of airports, roads and public utilities has been slow to catch on in the U.S., fund managers say, is that politicians walk a narrow line any time they sell public property. A bankrupt toll road is considered a boondoggle even if it means investors paid taxpayers too much. Meanwhile taxpayers can feel shorted if investors reap big profits. In recent years, low interest rates have enabled local governments to borrow so cheaply that they’ve often been able to take privatization off the table.

“There isn’t a shortage of capital,” said Indra Dhar, Managing Director Real Assets at investment firm Cambridge Associates. “The shortage is in investible opportunities.”

Write to Ryan Dezember at [e-mail]