August 2020
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August 2020
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PE Panorama: Brookfield’s big fund answers the infrastructure deficit?

By Paul Mackintosh  
February 17, 2020

After some two decades dealing with private capital, I’m a profound sceptic of the asset class. To some extent it’s a feeling of disappointment, after seeing time and again general partners failing to deliver on their high-flown rhetoric of business improvement and more efficient ownership, as sordid greed and unconstrained arrogance resurface to upset the picture. But it’s a pity, because the world badly needs to see the volumes of capital in the hands of private equity funds put to work in ways that genuinely benefit the economy and the planet as a whole.

I hope that’s what’s going to happen with Brookfield Asset Management’s latest global infrastructure fund, Brookfield Infrastructure Fund IV, which closed earlier this month at a total of $20 billion. It’s not surprising that Brookfield managed this, given the oft-repeated drivers for current private capital fundraising: Brookfield originally targeted $17 billion, according to its own release, but was able finally to close at the target amount, including $5 billion of its own capital to secure alignment with the other investors. And at least this particular fund doesn’t seem to be piling too much onto the pyramid of dry powder in private equity: the Brookfield announcement notes that even before closing, the new fund has already “invested or committed approximately $8 billion, or 40% of its capital,” to infrastructure assets including US short-haul rail services and natural gas pipelines, data infrastructure in South America, New Zealand, India and the UK, and “a global portfolio of renewable power assets.” That’s just as well, given the size of the need. The G20’s Global Infrastructure Outlook initiative gives an infrastructure investment need of $3.2 trillion for 2020, rising to $3.9 trillion by 2030; with probable actual investment at only $2.7 trillion in 2020, and $3.3 trillion in 2030.

Against that kind of shortfall, Brookfield’s fund is a drop in the bucket – but will it help even if it is used? There are reasons to hope so. Infrastructure inevitably affects populations in a way that other less essential businesses don’t: if you’re an infrastructure investor, you can’t hide behind claims that your primary duty is to your limited partners, rather than to the recipients of the services you provide. Brookfield’s website claims that it is “invested in infrastructure that forms the backbone of the global economy” – if so, it had better not break that backbone, or slip any discs. Meanwhile, the continuing hunt for yield amid persistent low interest rates is likely to make the lower and longer-term rates of return in infrastructure comparatively more attractive, offering stability and predictability in a world plagued by volatility and risk. Savvy managers – and policymakers – could turn that situation to advantage, and ensure that the world’s badly needed infrastructure gets funded. That’d be welcome.