Following a significant uptick in the second quarter, private equity infrastructure fundraising activity fell back to a more normal level in Q3/2021, according to the i3 fundraising database. Despite trailing Q2/2021, the third quarter still came in well ahead of Q3/2020. By the end of Q3/2021, 12 funds had raised more than $22.5 billion in equity capital. This is about 37 percent less than the $35.6 billion raised through 16 fund closings in the second quarter, but 41 percent more than the $15.9 billion raised a year ago in Q3/2020.
The funds closed in Q3/2021 were relatively small when compared to the surge in megafunds we have become accustomed to. Just four of the 12 reached $2 billion or more. Only one, the $6.9 billion Macquarie Infrastructure Partners V (MIP V), raised more than $3 billion. MIP V is a global fund with a wide-ranging strategy focused on communications, telecoms, energy, ports, transportation, utilities, waste and water.
The other three large funds include Vauban Infrastructure Partners’ $3.0 billion Core Infrastructure Fund III, which has a focus on brownfields, energy, IT and social infrastructure in Europe; the $2.8 billion Stonepeak Global Renewables Fund, which has a name that tells you everything you need to know; and the $2.7 billion Meridiam Sustainable Infrastructure European IV fund, which is a diversified fund focused on energy, greenfields, social infrastructure and transportation in Europe.
Of the 12 funds that closed in Q3/2021, seven are focused on Europe, three are global, one has a mandate to invest in Africa, and one is investing in both Europe and Asia. None are focused on the United States. This lack of interest in the United States might change in the future, however. The recently enacted $1 trillion Infrastructure Investment and Jobs Act includes provisions that encourage public-private partnerships, which could make all the difference when it comes to piquing investment managers’ interest. For example, the legislation doubles private activity bond (PAB) volume for surface transportation projects to $30 billion from $15 billion, a central financing tool for P3 projects that lowers the cost of financing and encourages private interest. The bill also allows the use of PABs for broadband and carbon-capture projects. In addition, the act requires value-for-money analysis of certain projects, which could theoretically show that P3s are a better deal than full public financing. If the United States becomes more welcoming to P3s, we will undoubtedly see more funds looking to take advantage of the opportunity.
Despite a drop-off in Q3/2021 fundraising when compared with the second quarter, 2021 is well on its way to exceeding 2020’s total, and could conceivably outpace 2019, when more than $93 billion was raised. Every year since at least 2018 has had a $40 billion-plus quarter. We have not yet seen that level in 2021, but fund closings for Q4/2021 are just beginning to be captured by the i3 fundraising database. If Q4/2021 breaches the $40 billion mark, the next fundraising report will be examining a record year.
Sheila Hopkins is a freelance writer living in Auburn, Ala.