Manulife Sets Up $2 Billion Infrastructure Fund

The company has agreed to maintain a 40% ownership of certain of the assets and 50% ownership of the other assets. In addition, the company will match the fund's new primary investments on a dollar-for-dollar basis.

According to Kendircioglu, investments will be focused on regulated utilities, such as those involved with electricity transmission and distribution, gas distribution, water and wastewater treatment; contracted energy assets, such as assets related to wind, solar, hydro, natural-gas fired, pipelines, and energy and fuel storage; transportation, such as toll roads, bridges, tunnels, parking facilities, ports, airports, and railroads; telecommunications systems; and other infrastructure assets.

Investors Target Infrastructure

The new Manulife fund joins a growing number of equity pools that invest in infrastructure assets.

Blackstone, for example, is reportedly near rounding up the commitments to set up a $5 billion infrastructure fund.

Sovereign wealth funds have also been eager to invest in infrastructure assets, according to a Preqin blog post by Ibrahim Yildiz. Yildiz writes that 64% of sovereign wealth funds invest in infrastructure projects, and that 63% of the sovereign wealth funds invest in infrastructure through unlisted funds. Yildiz points to Saudi Arabia's Public Investment Fund, which is an anchor investor in Blackstone's fund, as an example of a sovereign wealth fund investing through an unlisted fund in infrastructure.

"Infrastructure remains an important component in the portfolios of many [sovereign wealth funds] due to the attraction of strong risk-adjusted returns and inflation-hedging characteristics on offer," he writes.

However, the asset class may not be immune to the competitive forces affecting much of commercial real estate: Yildiz predicts that increasing competition for assets, and the resulting effect of rising asset prices, are likely to eat into eventual net returns.

— Read Manulife to Expand Private Asset Management Business, on ThinkAdvisor.

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