Navigating the capital raising process for long-duration infrastructure vehicles
Fundraising for infrastructure funds involves targeting sophisticated institutional investors with dedicated infrastructure allocation programs and long investment horizons. The capital raising process typically extends 12-24 months and requires demonstrating capabilities across investment sourcing, asset management, and operational execution. The specialized nature of infrastructure investing and the institutional LP base create fundraising dynamics that differ meaningfully from other private fund strategies.
Infrastructure funds attract a concentrated universe of institutional investors with specific characteristics. Understanding this investor base shapes fundraising strategy and positioning.
Infrastructure fundraising typically proceeds through defined phases, though timelines vary based on market conditions, manager track record, and fund size.
Pre-marketing involves preparing materials and selectively engaging investors before formal launch. For established managers, this phase gauges appetite and refines positioning. For emerging managers, pre-marketing may involve extensive relationship building with target investors.
First close targets typically occur 9-12 months after formal launch, with final close 18-24 months after marketing begins. Infrastructure funds often hold multiple interim closes, allowing investors to join at different points during the fundraising period.
The extended fundraising timeline reflects the thorough due diligence institutional infrastructure investors conduct. Investment committees, external consultants, and operational due diligence processes all require time to complete.
Infrastructure fundraising materials must address both investment capabilities and operational execution, reflecting the asset class's hands-on nature.
Infrastructure track records present unique challenges given long fund lives and asset holding periods. Funds may be largely unrealized, making performance demonstration dependent on interim valuations rather than actual exits. Investors scrutinize valuation methodologies and discount rates carefully.
For newer managers or teams, track record presentation may involve prior experience at other organizations. Attribution of performance to specific individuals, portable track record verification, and team continuity all receive investor attention.
Operational track record matters alongside investment returns. Demonstrating successful construction project completion, regulatory navigation, and asset operational improvements provides evidence of execution capabilities that infrastructure requires.
Infrastructure fund terms generally follow private equity conventions but with modifications reflecting asset class characteristics.
Management fees typically range from 1.0% to 1.5% of committed capital during the investment period, often stepping down thereafter. The long fund life means management fee structures span extended periods, and terms around fee reductions during harvest phases warrant attention.
Carried interest commonly follows the 20% standard, though hurdle rates and calculation methodologies vary. Deal-by-deal versus whole-fund carry structures, European versus American waterfalls, and catch-up provisions all affect GP economics.
Co-investment rights are frequently negotiated by large institutional investors. Infrastructure transactions often support co-investment given their size, and terms around allocation, fees, and carry on co-investments require clear documentation.
Investment consultants and gatekeepers significantly influence infrastructure fund access to institutional capital. These intermediaries advise pension funds and other institutions on manager selection and monitor existing relationships.
Building consultant relationships requires ongoing engagement beyond specific fundraising periods. Consultants conduct their own due diligence and maintain manager databases that inform client recommendations. Understanding consultant evaluation criteria and maintaining updated information supports long-term relationship development.
First-time infrastructure fund managers face particular challenges given the institutional investor base and operational intensity of the asset class. Strategies that may help include:
Infrastructure fundraising requires patience, thorough preparation, and understanding of the institutional investor decision-making process. The concentrated nature of the infrastructure LP universe means that reputation and relationships built over multiple fund cycles significantly influence fundraising success for subsequent vehicles.