AMP Capital is raising capital for its second Capital Infrastructure Debt Fund and hopes to garner a sizable portion from Asian investors to reach its target of $1 billion.

The launch of the new vehicle comes only six months after the close of predecessor vehicle Fund I, which closed at €400 million ($520 million) in June with 30 institutional investors, including pension and endowments hailing from China, Japan, Australia, the US and Germany.

More than half of Fund I’s investors are from Asia, Andrew Jones, AMP’s global head of infrastructure debt, tells AsianInvestor.

Sydney-based AMP credits the swift succession in launching Fund II as a testament to the growing popularity of the niche infrastructure debt asset class among institutional investors, particularly pension funds and insurance companies.

“We already have strong early interest in our second fund and we believe that the defensive, yield-focused characteristics of infrastructure debt represents a very good fit for Asian institutional investors," says London-based Jones.

Infrastructure debt vehicles provide the long-term funding necessary for new infrastructure developments and also asset re-financing – capital that has been less readily available after the financial crisis.

AMP’s new fund will invest in the subordinated debt of infrastructure assets in what AMP terms “essential services” of water, gas, electricity and transportation in Europe, North America and Australia.

Predecessor Fund I is more than half-invested, with €218 million deployed in six subordinated loans in Europe and North America.

Infrastructure debt vehicles are relatively new, emerging during the post-crisis era to provide capital funding to projects, while offering investors with another means of accessing the infrastructure asset class. 

Large sovereigns and pensions in recent years have been directly acquiring infrastructure assets. In doing so, they bypass funds that invest in infrastructure, which remain popular among institutional investors which do not want to manage directly-owned assets, such as utilities and toll road operators.

Infrastructure debt vehicles are generally considered to be lower-risk than other alternative funds, making them attractive to pensions and insurance firms.

AMP has deployed $1.7 billion in infrastructure debt investments since 2001, generating an internal rate of return of 9.5% and a cash yield of 9.8%. Its infrastructure debt team has eight executives across London, New York and Sydney.

According to data provider Preqin, the number of unlisted infrastructure debt funds has steadily been growing, reaching 46 by June 2012, up from 27 at the end of 2010.