Among private investors, the term “infrastructure” denotes a wide range of physical assets that facilitate a society’s principal economic activities — transportation, energy and utility, communications and “social” infrastructure, for example. Historically, funding for these projects has been the domain of governments, multilateral institutions, official lenders, and large commercial banks providing debt alongside such other institutions. However, with an estimated $57 trillion needed to finance infrastructure development around the world through 2030, according to a report from McKinsey & Co., private investors have an unprecedented opportunity to fill some of the gap created by public-funding shortfalls, and the last decade has been witness to a flurry of innovation in private funding methods and structures, with varying degrees of success. As the asset class matures, some infrastructure funds—private equity vehicles that attract capital commitments from investors and deploy that capital to invest in these assets—will need to explore new ways to create and demonstrate value in order to capture some of that capital.

Fewer unlisted infrastructure funds reached final close in 2014 than in 2013, and the level of institutional investor capital secured by those funds fell by almost 16% when compared to 2013; however, the aggregate $37bn raised by unlisted infrastructure fund managers was still 23% higher than the $30bn raised in 2012, and the amounts raised by funds reaching interim close increased for the twelve-month period ending January 2015. An increasing proportion of that capital is concentrated among a few large players, and the market remains crowded, with 144 unlisted infrastructure funds in market as of January 2015, targeting aggregate capital commitments of $93bn. And while the average fundraising lifecycle shortened to 19 months in 2014, as of January 2015 40% of funds in market had been fundraising for over two years.²

Although fund managers face increased competition,...