THE RISE OF INFRASTRUCTURE IN ASIA
Preqin Ltd. 2018 / preqin2Real Assets Spotlight|June 2018
T
he Asian infrastructure market
has seen a surge in assets under
management (AUM) in the past 10 years,
with the size of the industry increasing by
a factor of eight between the end of 2008
($7.1bn) and September 2017 ($57bn, Fig.
1). The continued economic development
of the continent and the growth of
the population is driving the need for
infrastructure investment, and has resulted
in the formation of the multilateral
development bank – Asian Infrastructure
Investment Bank (AIIB) – in 2015 to ensure
these needs are met. With 57 founding
member countries and its continued
expansion – Kenya recently became the
latest country to be awarded membership
status – the AIIB has loaned out in excess
of $4bn since launching (as at May 2018).
DRY POWDER AND AUM
In September 2017, Asia-focused unlisted
infrastructure AUM stood at a record
$57bn, with unrealized value having
increased each year since 2008. This
accounts for 13% of global infrastructure
AUM, up from 0.1% at the end of 2008, and
highlights the signifcant expansion of the
Asian infrastructure industry. Dry powder
experienced steady growth between 2008
and 2012, rising from $4.4bn to $8.5bn
within this four-year period. However,
between December 2012 and December
2013 this fgure almost doubled to $15bn.
FUNDRAISING
Despite the growth in Asia-focused AUM,
2017 recorded a substantial decrease
in Asia-focused unlisted infrastructure
fundraising compared to 2016. Only eight
Asia-focused funds reached a fnal close
in 2017, securing an aggregate $1.6bn,
signifcantly lower than the 13 funds that
closed in 2016 for a record $11bn (Fig.
2). Since the number of fund managers
operating in the region is already
comparatively low, this slowdown can be
attributed to fund managers focusing on
investing their capital from the previous
year.
THE RISE OF
INFRASTRUCTURE IN ASIA
Against a backdrop of rapid growth and rising demand, we profle the infrastructure market in Asia, providing details on fundraising, funds in
market, deals, investors and the burgeoning market for renewable energy assets.
Fig. 3: Largest Unlisted Asia-Focused Infrastructure Funds Closed in the Last 10 Years (As at May 2018)
FundFirmHeadquartersFund Size (mn)Primary StrategyFinal Close Date
Macquarie Asia Infrastructure Fund IIMacquarie Infrastructure and Real Assets (MIRA)London, UK3,300 USDCoreApr-18
Guangzhou City Development Industry
FundSfundGuangzhou, China20,000 CNYValue AddedDec-14
China Aviation Investment FundCivil Aviation Investment Management CompanyBeijing, China20,000 CNYOpportunisticAug-14
Macquarie Asia Infrastructure FundMacquarie Infrastructure and Real Assets (MIRA)London, UK3,100 USDCoreFeb-16
CCCC First Phase Equity Investment
FundCCCC Fund ManagementBeijing, China15,000 CNYValue AddedNov-15
Source: Preqin111120
23
201311.7
3.33.93.54.3
6.8
11.4
7.2
11.4
1.6
3.351525
200200201201201201201201201201201
8 Y
TD
No. of Funds
Closed
Aggregate
Capital Raised
($bn)
Source: Preqin
Year of Final Close
Fig. 2: Annual Asia-Focused Unlisted Infrastructure Fundraising,
2008 - 2018 YTD (As at May 2018)
44688
1513162018346
1013
1620
27
33391030
40
50
60
De
c-0De
c-0De
c-1De
c-1De
c-1De
c-1De
c-1De
c-1De
c-1Sep
-17
Unrealized
Value ($bn)
Dry Powder
($bn)
Source: Preqin
Fig. 1: Asia-Focused Unlisted Infrastructure Assets under
Management, 2008 - 2017
THE RISE OF INFRASTRUCTURE IN ASIA
Preqin Ltd. 2018 / preqin3Real Assets Spotlight|June 2018
The fundraising horizon does appear
to be improving in 2018, with $3.3bn in
aggregate capital already secured by one
fund: UK-based Macquarie Infrastructure
and Real Assets’ (MIRA) Macquarie Asia
Infrastructure Fund II is the largest Asia-
focused unlisted infrastructure fund to
close in the past 10 years (Fig. 3). The
fund closed in April 2018 on 102% of its
target size and is looking to target core
Asian economic infrastructure assets and
related companies, in sectors including
transportation, telecoms, utilities and
waste management.
FUNDS IN MARKET
There are currently 15 Asia-focused
unlisted infrastructure funds in market,
targeting an aggregate $8.3bn in investor
capital, only two of which are targeting
$1bn or more (Fig. 4). The largest of
these is NIIF Master Fund managed
by India-based National Investment
and Infrastructure Fund. The fund
is targeting $2.1bn to invest in large
sectoral platforms in the infrastructure
space, allocating to both greenfeld and
brownfeld projects within India, and
reached a frst close on $650mn in October
2017. The second largest, Tamil Nadu
Infrastructure Development Fund, is also
based in India and is managed by Tamil
Nadu Infrastructure Fund Management
Corporation. The debt/mezzanine vehicle
is seeking INR 120,000mn ($1.8bn) and
aims to provide debt fnancing for India’s
infrastructure sectors.
Of the 15 funds currently in market,
eight are primarily focused on Indian
infrastructure opportunities. Over the
past few years, the Indian infrastructure
sector has experienced a signifcant
transition towards sustainability due
to the accelerated rate of urbanization
through foreign direct investment
and a rise in job creation. The Indian
Government’s Smart City initiative, which
requires comprehensive development of
infrastructure, has become a substantial
catalyst for economic growth and could
partially explain the large attraction of
India for unlisted infrastructure funds in
market.
DEAL FLOW
One of the most prevalent challenges
facing unlisted infrastructure fund
managers globally is deal fow – a third
of fund managers surveyed by Preqin in
November 2017 felt it was a key issue
facing the industry. As Fig. 5 illustrates,
2017 recorded the fewest deals in Asia
since 2012, with 373 deals completed
for a reported $74bn, low fgures when
Fig. 4: Largest Asia-Focused Unlisted Infrastructure Funds in Market (As at May 2018)
FundFirmHeadquartersTarget Size (mn)Primary Strategy
NIIF Master FundNational Investment and Infrastructure FundMumbai, India2,100 USDCore
Tamil Nadu Infrastructure Development FundTamil Nadu Infrastructure Fund Management CorporationTamil Nadu, India120,000 INRDebt
India Infrastructure FundMorgan Stanley Infrastructure PartnersNew York, US750 USDOpportunistic
Green Growth Equity FundEverstone CapitalSingapore500 GBPValue Added
EFS Energy Japan InvestmentGE Energy Financial ServicesStamford, US75,000 JPYCore-Plus
Source: Preqin
204
256
307312306
432473
613613
373
912528273331
4144
87
121
744748434946
6472
133
148141
3920
40
60
80
100
120
140
160100
200
300
400
500
600
700
20082009201020112012201320142015201620172018
YTD
No. of DealsReported Aggregate
Deal Value ($bn)
Estimated Aggregate
Deal Value ($bn)
Source: Preqin
No
. of
De
als
Fig. 5: Infrastructure Deals in Asia, 2008 - 2018 YTD (As at May
2018)
229
188
140156151125152
204230
346
423402
291281
332334
295300295
328345
38250
100
150
200
250
300
350
400
450
20082009201020112012201320142015201620172018
YTDAsiaGlobal
Source: Preqin
Ave
rag
e D
eal
Siz
e ($
mn
)
Fig. 6: Average Size of Infrastructure Deals, 2008 - 2018 YTD (As
at May 2018)
Ag
gre
gat
e D
eal
Va
lue
($b
n)
As the Asian
continent has
developed, its energy
demand has increased
as has the need for
sustainable sources.
THE RISE OF INFRASTRUCTURE IN ASIA
Preqin Ltd. 2018 / preqin4Real Assets Spotlight|June 2018
compared with the 613 deals completed
for a reported $121bn in 2016.
Despite the decline in deal activity between
2016 and 2017, the average size of Asian
deals has substantially increased during
the same period. In the past decade,
average deal size globally has consistently
been higher than the average Asian deal
size, but in 2017 this trend reversed, as the
average size of Asian deals increased from
$230mn in 2016 to $346mn, $1mn higher
than the global average (Fig. 6). This steep
incline points to the prevalence of high
valuations, which are the most widespread
concern among unlisted infrastructure
fund managers globally: 59% of those
surveyed reported it as a key challenge.
Over the past 10 years, 48% of the 3,980
unlisted infrastructure deals in Asia
have been for greenfeld assets, while
secondary-stage assets account for
31% and brownfeld assets make up the
remainder. Considering that Asia consists
largely of developing countries, the large
volume of greenfeld deals does not come
as much of a surprise given the many areas
of unused rural land and the push towards
a more sustainable and clean environment.
The fve largest infrastructure deals
completed in Asia in 2017 involved a
mixture of project stages; notable deals
included Rosneft, Trafgura and United
Capital Partners’ $12.9bn acquisition of
Essar Oil, a secondary-stage Indian oil
company, and Copenhagen Infrastructure
Partners’TWD 180bn acquisition of Taiwan
Strait Wind Assets, a greenfeld wind power
site located in Taiwan.
Of the 373 deals completed in Asia in
2017, India (88) and China (87) saw the
most activity. While India has dominated
the deals landscape for a considerable
period, China has gained some traction,
making up 30% of all deals in Asia in 2018
so far, compared with 29% in India (Fig. 7).
In 2017, 3,110 infrastructure deals were
completed globally, with Asia representing
only 12% of the total (Fig. 8). Prior to 2017,
Asia’s share of global deals had increased
each year since 2012.
RENEWABLE ENERGY DEALS
As the Asian continent has developed, its
energy demand has increased as has the
need for sustainable sources. Prior to 2008,
renewable energy was not considered a
valuable investment opportunity in Asia,
but over the past 10 years, the number of
renewable energy deals in Asia each year
has greatly increased (Fig. 9). Since 2008,
there have been 1,338 renewable energy
infrastructure deals in Asia, amassing
a total reported value of $106bn. 2016
saw a record 228 deals completed for a
reported value of $21bn. Although the
number of such deals fell to 168 in 2017,
371383550632677757
9429249511,053
275
544524554
789730783
8617881,078
1,147
300
231268
324
338318488
588685
682394
94
187152
206
262341
441
428365
446502
113500
1,000
1,500
2,000
2,500
3,000
3,500
200200201201201201201201201201201
8 Y
TD
Rest of World
Asia
Europe
North America
Source: Preqin
No
. of
De
als
Fig. 8: Infrastructure Deals by Region, 2007 - 2018 YTD (As at
May 2018)51525
30
35
40
45
5050
100
150
200
250
20082009201020112012201320142015201620172018
YTD
No. of DealsReported Aggregate
Deal Value ($bn)
Estimated Aggregate
Deal Value ($bn)
Source: Preqin
Fig. 9: Renewable Energy Infrastructure Deals in Asia,
2008 - 2018 YTD (As at May 2018)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2012201320142015201620172018 YTD
Vietnam
South Korea
Singapore
Thailand
Indonesia
Philippines
Japan
China
India
Source: Preqin
Fig. 7: Infrastructure Deals in Asia by Country, 2012 - 2018 YTD
(As at May 2018)
Pr
op
or
tio
n o
f D
ea
ls
KEY CHALLENGES FACING UNLISTED
INFRASTRUCTURE FUND MANAGERS IN 2018
Valuations
Regulation
Deal Flow
Fee Pressure
Performance
59%
36%
33%
23%
20%
No
. of
De
als
Ag
gre
gat
e D
eal
Va
lue
($b
n)。