Dive Brief:
- Canadian firm Brookfield Asset Management announced it has raised $14 billion for its Brookfield Infrastructure Fund III, marking the industry's largest private infrastructure fund to date, according to Bloomberg.
- The fund exceeded its $10 billion target in nine months, with 25% of money raised coming from Asia-based institutional investors.
- The fund will focus on $1 billion-plus deals and will seek to take advantage of the global trend toward privatization of infrastructure holdings, which are considered to be more stable than "volatile," low-yield equity and bond markets.
Dive Insight:
Brookfield, calling infrastructure assets "the backbone of the economy" with the potential to overshadow real estate, said the company has already committed funds for certain projects, including $3 billion for U.S. hydroelectric and Colombian power projects. Sam Pollock, the head of Brookfield Infrastructure Partners, told Bloomberg that interest in private infrastructure investment dollars on behalf of local governments has increased as government funding has fallen short.
Brookfield's news is the second major private infrastructure fund announcement so far this year, as former NBA star Earvin "Magic" Johnson resigned from his position on the board of payment company Square in May after his new infrastructure fund JLC Loop Capital Partners raised $1.3 billion in the first quarter of 2016. Johnson said he started JLC to develop infrastructure projects in the wake of President Barack Obama’s announcement that the U.S. government would spend as much as $12 trillion on infrastructure over the next decade.
The trend of governments turning to the private sector for help with major infrastructure projects has been steadily growing in the U.S. Many government entities are turning to public-private partnerships to not only help finance their projects but to serve as design, construction, operations and maintenance experts as well. A May Bipartisan Policy Center report found that the private sector could be the solution to fixing the country’s deteriorating infrastructure, but investment must be more transparent and subject to less red tape.
The American Society of Civil Engineers reported that the U.S. could surrender at least 2.5 million jobs and $4 trillion in gross domestic product over the next decade if it can’t overcome the projected $1.44 trillion gap between necessary infrastructure funding and spending. The U.S. has come up with only $1.88 trillion of the needed $3.32 trillion, and, barring additional investment, the shortfall will grow to $5.18 trillion by 2040. Surface transportation has the biggest funding gap, according to the ASCE.
American infrastructure spending is largely dependent on state-level action, and when legislators can't agree on how to fund necessary projects, it can lead to political infighting or worse. Most recently, New Jersey Gov. Chris Christie ordered a shutdown of all state-funded road and highway projects after he couldn't reach an agreement with state Senate Democrats on his plan to refund the state transportation "credit card."