With longer holds, Carlyle infrastructure fund targets $2.5 bln

Carlyle Group is targeting $2.5 billion for Carlyle Global Infrastructure Opportunities I, which features longer hold times for non-core infrastructure investments with a return target in the mid-teens, according to sources.

The Washington firm is sifting for deals while avoiding pricier assets such as London City Airport. The airport drew a purchase-price multiple of roughly 35x EBITDA in its sale to Alberta Investment Management Group, Ontario Teachers’ Pension Plan and OMERS earlier this year.

While an airport is considered a safe bet for cash flow, paying such a high multiple presents risks, sources said.

12-year life, 7-year holds

Instead, Carlyle plans to extend its expertise in growing companies to solid assets available at lower prices. Examples include oil-and-gas storage, utilities, water-treatment facilities, renewable power and agriculture assets in developed countries.

The fund will have a 12-year life, with hold periods of about seven years, giving the team more runway to grow portfolio assets, compared with the roughly four-year hold in a traditional fund, sources said.

A spokesman for Carlyle Group declined to comment.

Andrew Marino, co-head of Carlyle Global Infrastructure Opportunities Fund, shifted to the role earlier this year after serving as chief operating officer of the firm’s Natural Resources group. For eight years prior to 2012, he worked on the firm’s U.S. buyouts team.

Peter Taylor joined Carlyle in June as co-head of the fund. He formerly worked for 15 years at Hastings Infrastructure, including as head of global investments and asset management. At Hastings, he led some large transactions, including its roughly $7.7 billion purchase of TransGrid last year, as well as the firm’s sale of its 25 percent stake in Freeport LNG in 2014.

Chris Tehranian, principal at consultant Meketa Investment Group Inc, said LPs like infrastructure investments because they offer yield in a flat interest rate environment through tolls, pipeline charges and other income. If inflation kicks in, holders of infrastructure assets are often able to raise prices to their customers, enabling flexibility to match changing economic conditions.

“There’s a defensive nature to the assets,” Tehranian said. “They also offer a low correlation to the general marketplace.”

Carlyle plans to launch the new fund series to meet a larger-than-expected allocation into infrastructure from LPs, sources said.

Brookfield Asset Management recently wrapped up Brookfield Infrastructure Fund III, the largest infrastructure fund ever raised, with $14 billion.

Chris Witkowsky contributed to this report.

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Photo courtesy ©iStock/Jenna Wagner

This story has been updated to include a response from a Carlyle spokesman.