InstarAGF Asset Management is seeing stronger-than-expected demand from institutional investors for its flagship infrastructure fund and is confident it will close the first round of fundraising by year end, its top executive said on Tuesday.
Toronto-based InstarAGF, an asset management joint venture between Instar Group Inc and AGF Management Ltd (TSX: AGF.B), plans to raise about $400 million (US$298.02 million) to $450 million in its first close by year-end, Chief Executive Gregory Smith said. The $750 million-targeted fund will be capped at $1 billion.
The fund, which focuses on North American infrastructure opportunities, has received interest from pension funds, insurance companies and other institutional asset managers, he said. It primarily targets investors from North America and Europe.
Bond yields near historic lows and equity market volatility have prompted many big investors in recent years to allocate more capital to alternative assets such as infrastructure, real estate, private equity and hedge funds.
“Investors want to be in the asset class. Infrastructure offers very low volatility, it offers great inflation protection and it offers a strong return alternative,” Smith said in an interview, adding it has a very low correlation to fixed income and public equities.
The appeal of infrastructure has led to increased competition for assets from major players like pension and sovereign wealth funds and private equity firms.
Smith said that InstarAGF hopes to focus on mid-market infrastructure plays not targeted by major managers.
“The gap in infrastructure is in the municipality level,” he said.
InstarAGF’s existing investments include Canadian infrastructure and midstream energy assets.
Earlier this year, a consortium including InstarAGF bought the passenger terminal at Toronto’s downtown Billy Bishop Airport.
InstarAGF also recently acquired two wind development projects in British Columbia from Zero Emission Energy Developments Inc, a Vancouver-based renewable energy company.
InstarAGF is in multiple discussions to purchase infrastructure assets in the United States, Smith said.
The company typically invests in projects that have an enterprise value of $100 million to $1 billion and cuts equity cheques between $20 million and $200 million.
InstarAGF also said on Tuesday that Kindle Capital Group Inc‘s principals, George So and Alex Jerome, have joined InstarAGF. Kindle is an infrastructure-focused investment firm with about $500 million in assets under management.
By John Tilak and Euan Rocha
(Editing by Jeffrey Hodgson and Christian Plumb)
(This story has been edited by Kirk Falconer, editor of PE Hub Canada)
Photo of infrastructure development courtesy of Shutterstock
Photo of Gregory Smith courtesy of InstarAGF Asset Management