Macquarie builds secondaries sales into latest infra fund

The long-life vehicle, which will focus on regulated assets mostly in Europe, is targeting an initial €2.5bn.

Macquarie Infrastructure and Real Assets’ Super Core Infrastructure Fund has included a facility for secondaries sales in its fund documentation, according to public pension documents seen by sister publication Infrastructure Investor.

The fund is set to close imminently on €2.5 billion as of mid-June after the $31 billion South Carolina Retirement System committed €125 million to the vehicle. It is targeting an annual 7 percent to 8 percent net return with a 5 percent cash yield.

The fund is structured as a 20-year fund starting from the close and can be extended in five-year increments into perpetuity, provided a majority of LPs agree. A structured secondaries programme is available every five years from and including year 10.

Liquidity windows, which allow investors to exit a fund during its life, are a feature of infrastructure funds given their typically long lifespans, Jeremy Pickles, a partner in the investment funds team at Hogan Lovells, told Secondaries Investor.

“The problem with them has been how to fund the exits, and [how to choose which assets to sell] in order to do so,” he said. “Given the developments in the secondaries market over recent years, it is a natural step to seek to fund these liquidity windows by way of a structured secondaries programme, and keep the portfolio intact.

Super Core Infrastructure Fund’s performance structure is predicated on yield rather than returns, with a performance fee of 20 percent of the vehicle’s yield over a 4 percent yield hurdle per year, after fees and expenses. Management fees amount to 50 basis points on uninvested capital and are capped at 65 basis points on the fund’s net asset value.

Documents from South Carolina’s Retirement System Investment Commission indicate the fund should have at least nine assets by the time it closes on Series 3, sometime in 2021. It currently owns stakes in two assets – the UK’s Cadent Gas and Finnish electricity distribution company Elenia – and will focus mainly on European regulated utilities, with up to 25 percent of the three-series capital-raise eligible to be invested in US, Canadian and Australian assets.

MIRA declined to comment on the fundraise.

Infrastructure funds raised move than $66 billion last year, setting a record for the asset class within the private funds market, according to Credit Suisse private fund group’s Secondary Market Update May 2018. They represented 8.4 percent of all private funds raised in 2017, up from an average of around 7 percent over the preceding 10 years.

The asset class is “particularly well poised for increased secondary dealflow in the years ahead,” Credit Suisse noted.

– Rod James contributed to this report.