Barclays Capital has set up a £500m fund that will invest in the debt of infrastructure projects, the latest asset manager to offer an alternative to equity-focussed funds in the sector.
Private equity-type funds investing in the debt rather than equity of infrastructure assets are looking to fill the void left by banks tightening their lending in the face of stricter capital requirements, such as those posed by Basel III.
Basel III rules increasing the amount of capital banks hold in core capital are expected to weigh on the ability of banks to provide infrastructure loans on which cash-strapped governments and developers of power plants, pipelines and renewable energy such as wind farms rely to fund schemes.
The bank said its Barclays Senior Debt Infrastructure Fund I would have a target size of 500 million pounds and invest in the senior debt of social, economic and energy infrastructure projects.
Britain's national plan outlines £200bn of infrastructure investment over the next five years, a tall order without the participation of the private sector, which has few debt investment opportunities, Barclays said.
"We expect to see institutional investors supporting the modernisation of significant elements of public infrastructure whilst gaining long-term exposure to this attractive asset class," David Cooper, head of infrastructure debt at Barclays Corporate, said in the statement.
Barclays said there was good initial demand for the fund from prospective institutional investors who seek long-term, predictable cash flows, such as pension funds, insurance firms and sovereign wealth funds.
City A.M. Reporter