Speaker 1Hi, I'm Bruno Alves, Editor-in-Chief of Infrastructure Investor, and welcome to the Infrastructure Investor podcast. In today's episode, I sit down with Infrastructure Investor America's editor, Zach Bentley, to talk about fundraising for the first half of the year. With more than $134 billion raised, H1 2025 is already better than the whole of 2024. Zach and I spend most of our discussion ascertaining how solid the fundraising recovery is, how metrics like time on the road have evolved, what fundraising for 2026 could look like, LP appetite, and much more. Hi, Zach, good to see you. Welcome to the podcast. Hi, Bruno. So earlier this year, about six months ago, we took a look at our fundraisers. had 21% of funds closing below target, versus 46% in 2024. Now that seems like a more significant evolution. And also anecdotally, it seems to be something that's, you know, borne out in what we're seeing.
Speaker 2Yeah. And I think you've also seen managers get very close to the target one way or another. I think if you take GIP closing on 25.2 when their target was 25, CIP closing on 12, which was their target. Macquarie's America's Focus Fund closed on 6.8 when target was seven. And so some of these are outperforming, some of these are underperformance, but really it's the striving to get as close to that target as possible when such a difficult fundraising market.
Speaker 1Yeah, yeah. I mean, it remains to be seen now, and especially when we finish 2026, it remains to be seen how fundraising targets are going to evolve. We obviously came from years where they were just going up and up and up. And by quite a few strides, I think the new generation of funds are going to evolve. And I think it's going to evolve. What are high targets, but they haven't jumped from their predecessors so much. And so the situation now would imply, I think, that we are still going to be either conservatively keeping to predecessor targets or slightly increasing. I don't know if you're hearing anything about target setting or what you think about it also.
Speaker 2Yeah, I think in general, you can see we've already been trending that way. Digital Bridge, for example, set the target for their third fund at eight, having closed on a similar size, for the previous fund. Stone Peak targeted 15 for their latest fund, having closed on a similar size for the previous fund too. I think what I am hearing in market is there are some larger funds that are thinking of significantly pushing up the target. And this creates some debate internally as to where they go with that, maybe from a 10 to a 20 or something. But I think a lot of people are more on the other end of the spectrum.
Speaker 1Yeah. And perhaps then we'll bump up or we'll have our first high profile target miss. I don't think we've had one of those that's been really a proper miss. Like you said, we've had people slightly below what they said they would raise, but nothing that feels very substantial, at least not among big names, I guess.
Speaker 2Well, in H1, we did have Morgan Stanley, which finished a couple of billion short of its target.
Speaker 1Yeah, that's true, actually.
Speaker 2And then on the other end of the spectrum, we had Blue Owl with the formerly IPI, Partners Data Center Fund, closing on seven and targeting four. So we are in the extremities of the fundraising market.
Speaker 1Yeah, yeah, yeah. And perhaps, I mean, again, at this point, we've also published our investor report, our H1 investor report that, you know, looks at the data that we have in our database and what people disclose about their infrastructure allocations. And it presents a picture of how most investors are against that allocation. And I think here, it's again, a positive trend. We overall, we have 81% of all institutions either maintained or increased their exposure to the asset class. Only 19% actually decreased their allocation to infrastructure in H1. And perhaps more importantly, around 44% of all institutions still below their target allocation to infrastructure as of the midpoint of the year, trending very much with what you hear anecdotally. Would that be your impression too?
Speaker 2Yeah, but I'm gonna take out my negativity blanket and smuggle, everything you just said, go for it. I think within that report, there are encouraging signs, but I think we've always spoken about this dynamic of LPs, maybe under allocated to infrastructure, or there's there's so much more to come from the LP universe, and infrastructure has this growth trajectory. But then, I think if you look at our H1 investor report, the average infrastructure allocation across all types of institutions for H1 25 was 5.7%. But in H1 25, 2022, this was 5.5%. So this allocation isn't growing particularly quickly. And sort of if you compare to our real estate colleagues, their version of that report showed the average allocation for H1 2025 was 8% compared to 6.93 years ago. So even a more depressed market like real estate, the allocations are growing faster. I think also our report said that 49% want to increase. So I think we might continue to remain on this very slow growth trajectory.
Speaker 1Yeah, I think that is certainly a really interesting point. I mean, you can take the glass half full half empty approach, depending on how you want to view it. If you think of the more advanced infrastructure markets, Australia, Canada, and in particular pensions, and their allocations to the asset class, there are 10%, sometimes even above that. And if you look at the private pensions and public pension allocations to infrastructure, they're kind of around 6.5%. And I would guess historically, these are the ones that are going to grow the infrastructure allocations perhaps the quickest. So there's room for growth. But you're totally right that it's inching. It's not really taking on the healthy growth that maybe you would expect when you hear all the money that's needed for digital and the energy transition and just energy in general. Do you have any idea or any thoughts on why this is the case?
Speaker 2I mean, we're talking institutions globally. And so, you know, I want to put a broad blanket over things. But I think just speaking from the US perspective over here, there's a kind of bifurcated market here where you have in our investor report, we showed that six out of the 10 largest commitments came from US public pension funds. And then on the flip side of that, you have so many LPs, particularly in the public pension world in the US that have never touched infrastructure, they may have an allocation to infrastructure that is still yet to be fulfilled. Some need to be fulfilled. And so, you know, deep market education on what infrastructure is. So I think you have these two extremities that contribute to this. I would agree.
Speaker 1And also in you wrote about this somewhat recent US phenomenon of I think mostly US phenomenon at this time, certainly of allocating with an IT or backyard also, which could risk creating some issues for us as an asset class if GPs are not able to invest as they said they would and pensions actually expected investments to infrastructure come with this local character, right? Which isn't always the case, or probably isn't the case the majority of the times.
Speaker 2Yeah, yeah, we've we've seen a few instances of LPs asking GPs to invest in the state that they represent. Sometimes the GPs will say yes, of course, without any idea of how to do this. So it's an interesting and somewhat worrying trend to look out for.
Speaker 1Yeah, I would agree there. Maybe do a bit of a recap of something we published somewhat recently that we did a cover story in the past. I think it was our July August cover story, actually, that looked at how basically LPs were thinking about their infrastructure allocations, what role they played in their larger portfolios. Zach, you were heavily involved here, because maybe you can give the listeners a flavor of what we found, because that gives some hints as to how the asset class can potentially grow, right?
Speaker 2I think it goes back to a bit of what I was saying before about the fundraising figures for the other asset classes. So the conclusion is, I think, that the asset class can potentially grow in the larger portfolios. So the conclusion that we got from this cover story that we did was that the role that infrastructure plays in the portfolio is a similar one to one that's always done. It's there to generate the stable cash flows and the long-term returns. But this has been amplified in the last few years, where the performances of other private markets, such as private equity or real estate, have been playing havoc with investors' and GPs' portfolios. And so that infrastructure kind of plays a role in that. So I think it's a good idea to look at that. It kind of steps in with this sort of stabilizing effect. And quite often, the returns for infrastructure will appear higher than those of private equity and real estate. And you think, well, that's maybe not what it's meant to be doing in normal times. But in times where those are trending downwards, infrastructure is providing LPs with a bit of a safe haven, which was what it's always meant to do. It's just that effect is being amplified now.
Speaker 1And so is it fair to say that given where we are, given the volatility in the system, and also the role that infrastructure can play, even outside of the megatrends, you know, I think it's fair to say that's going to be a motivator for people to allocate. But just by how much that's going to grow the allocation, that's the interesting question, I suppose.
Speaker 2I suspect not a great deal, because those who don't know what infrastructure is still need that education. But it's an interesting data set for people to look at, regardless.
Speaker 1I would agree. And I think that's a good note for us to end on. So thanks, very much for your time, Zach, and for your insights.
Speaker 2Thank you, Bruno. Good to chat.
Speaker 1That, again, was Infrastructure Investor America's editor, Zach Bentley. To hear more of our episodes, head over to infrastructureinvestor.com forward slash podcast, or you can search and subscribe to the Infrastructure Investor podcast wherever you like to listen. You should also check out Infrastructure Investor Deals, the definitive platform for private investor deal intelligence. Subscribers gain exclusive access to real-time transaction data, expert-led analysis, and in-depth insights into capital flows, regional trends, and emerging market opportunities. Whether you're tracking the competition or identifying your next move, Infrastructure Investor Deals ensures that you stay ahead of the curve. Find out more today at infrastructureinvestordeals.com. © transcript Emily Beynon
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