Global demand for new infrastructure, ranging from clean energy to data projects, has spurred a burgeoning market for major private credit players such as Blackstone Inc, Brookfield Asset Management Ltd, and Ares Management Corp. In the past year, investors raised nearly $9 billion for funds dedicated to financing infrastructure initiatives. A white paper released by Ares suggests that this market has the potential to expand to $1.5 trillion, projecting over a five-year time frame based on 2022 data.
This collaboration is noteworthy, given that private credit investors traditionally lend to lower-rated companies and have recently ventured into investment-grade debt. Simultaneously, infrastructure projects are typically funded through bank loans. The surge in investment demand, coupled with fiscal constraints on governments, has driven developers to explore alternative financing sources.
Ian Simes, managing partner of Brookfield Asset Management Ltd.’s infrastructure group, emphasizes that infrastructure debt funds are likely to complement, rather than replace, bank lending, similar to their role in the junk credit market.
The sector is also drawing substantial capital from private equity funds, which is expected to fuel growth and boost demand for debt. BlackRock Inc., the world's largest asset manager, acquired Global Infrastructure Partners for $12.5 billion in January, aligning with CEO Larry Fink's vision to capitalize on the early stages of the infrastructure revolution.
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