Brookfield may invest in govt-backed infra fund

Canadian firm raises $14-billion global fund for infrastructure assets

Brookfield Asset Management, a Canadian private fund manager with $240 billion assets under management, raised a $14-billion infrastructure fund on Tuesday.

This is the largest ever fund raised for the asset class at a time when low interest rate and negative bond yield are forcing global investors to look for other opportunities. This might help the Indian government-backed National Investment and Infrastructure Fund (NIIF) rope in the Canadian investor for its Rs 40,000-crore corpus for reviving stalled projects and building new ones. Brookfield invests in India out of these global funds.

BROOKFIELD INDIA INVESTMENTS

Infrastructure

• August 2015:  Brookfield and Core Infrastructure acquired six road and three power projects from Gammon Infrastructure for Rs 563 crore cash and undisclosed performance-linked future payments
• June 2013: Brookfield and Sumitomo Mitsui Banking invested Rs 490 crore in Kotak Mahindra Group’s Core Infrastructure

Real Estate

• June 2013: It bought majority stake in six IT parks, owned by Unitech Corporate Park, for Rs 2,049 crore

In August last year, it made its first significant investment in Indian infrastructure by buying six road and three power projects from Gammon Infrastructure Projects. Brookfield joined hands with Core Infrastructure India Fund to buy these projects. Debt-laden Indian infrastructure firms have been selling assets in the past three years to deleverage their balance sheets. The deal included Rs 563 crore cash payment and undisclosed sums in the future based on certain performance targets. Anuj Ranjan, managing partner for Brookfield's India business had said then: "(It) provides us a great platform to participate in the Indian growth story over the long term."

Core Infrastructure is a Kotak Mahindra Group-led infrastructure fund raised in June 2013. For this fund also, Brookfield and Japanese Sumitomo Mitsui Banking Corporation together committed $90 million (Rs 490 crore) as the first close for the fund. Also, in June 2013, an affiliate of the Canadian firm, Brookfield Property Partners, bought majority stake in six IT parks owned by Unitech Corporate Park for Rs 2,049 crore ($347 million).

This fund also comes at a time when the Indian government is in the process of establishing the National Investment and Infrastructure Fund (NIIF). The government will hold a 49 per cent stake in this while majority will be owned by long-term investors such as pension funds and sovereign funds from across the globe. The government has already roped in Abu Dhabi Investment Authority, Qatar Investment Authority and Rusnano of Russia for the fund. The government also appointed senior World Bank official Sujoy Bose as the CEO for NIIF, who is now leading the initiative to raise funds from global investors. "Brookfield is an obvious choice before the NIIF to get investment and their larger-than-expected fund has only facilitated that," said the head of a rival global private equity giant. "It is an opportunity that funds like Brookfield will not let go, especially at a time when the focus is increasingly on emerging markets," said an investment banker who has dealt with Brookfield and is familiar with its investment plans.

Both the executives did not wish to be identified. A questionnaire sent to Brookfield on Wednesday did not elicit any response. "This fund-raising demonstrates that the demand for infrastructure investing is growing as investors continue to increase their allocations to real assets. We are excited about the opportunities we are seeing for investments," said Sam Pollock, head of Brookfield's infrastructure business, in a statement. In the past 18 months, Brookfield raised $27 billion across its flagship private fund strategies, including the close of its flagship real estate fund Brookfield Strategic Real Estate Partners II at $9 billion, and its flagship private equity fund Brookfield Capital Partners IV at $4 billion. All these funds crossed their fund-raising targets. The latest Brookfield Infrastructure Fund III exceeds the original $10-billion fund-raising target, reflecting a robust investment pipeline and strong investor demand for the asset class. BIF III's predecessor fund closed in 2013 with $7 billion of total capital commitments. Investors in the Fund are a diverse group of 120 institutional investors, including public and private pension plans, sovereign wealth funds, financial institutions, endowments and foundations and family offices. Nearly 60 per cent of Brookfield's investment money goes to projects in developed markets and 40 per cent goes into emerging markets that offer better potential upside coupled with greater risks.

Brookfield's funds might not remain the largest for long. Global Infrastructure Partners LP was seeking as much as $15 billion for its third flagship fund, Bloomberg had reported in November 2015.