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Manulife Sets Up $2 Billion Infrastructure Fund

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An arm of Manulife Financial Corp. has closed on about $2 billion in capital commitments, in U.S. dollars, to the John Hancock Infrastructure Fund.

The arrangement will give investors the ability to invest, via Manulife’s general account, in direct private equity investments and co-investments in the infrastructure sector in the United States.

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The fund’s offering was oversubscribed, according to Kevin Adolphe, president of the Manulife Asset Management Private Markets unit.

About 45% of the institutional investors participating in the fund are from North America, 40% from Europe and 15% from Asia.

About half of the capital commitments came from pension funds and insurance companies.

The other commitments came primarily from global asset managers, including some sovereign wealth funds.

John Anderson, Manulife’s head of corporate finance, and Recep Kendircioglu, senior managing director, power and infrastructure, are leading the fund.

The fund was partially seeded by the company.

The company has agreed to maintain a 40% ownership of certain of the assets and 50% ownership of the other assets. In addition, the company will match the fund’s new primary investments on a dollar-for-dollar basis.

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According to Kendircioglu, investments will be focused on regulated utilities, such as those involved with electricity transmission and distribution, gas distribution, water and wastewater treatment; contracted energy assets, such as assets related to wind, solar, hydro, natural-gas fired, pipelines, and energy and fuel storage; transportation, such as toll roads, bridges, tunnels, parking facilities, ports, airports, and railroads; telecommunications systems; and other infrastructure assets.

Investors Target Infrastructure

The new Manulife fund joins a growing number of equity pools that invest in infrastructure assets.

Blackstone, for example, is reportedly near rounding up the commitments to set up a $5 billion infrastructure fund.

Sovereign wealth funds have also been eager to invest in infrastructure assets, according to a Preqin blog post by Ibrahim Yildiz. Yildiz writes that 64% of sovereign wealth funds invest in infrastructure projects, and that 63% of the sovereign wealth funds invest in infrastructure through unlisted funds. Yildiz points to Saudi Arabia’s Public Investment Fund, which is an anchor investor in Blackstone’s fund, as an example of a sovereign wealth fund investing through an unlisted fund in infrastructure.

“Infrastructure remains an important component in the portfolios of many [sovereign wealth funds] due to the attraction of strong risk-adjusted returns and inflation-hedging characteristics on offer,” he writes.

However, the asset class may not be immune to the competitive forces affecting much of commercial real estate: Yildiz predicts that increasing competition for assets, and the resulting effect of rising asset prices, are likely to eat into eventual net returns.

— Read Manulife to Expand Private Asset Management Businesson ThinkAdvisor.

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