Australian asset manager AMP Capital has raised around $300 million from a dozen institutional investors for the new AMP Capital Infrastructure Debt Fund. But unlike many infrastructure funds launching of late, this one focuses on developed-market rather than emerging-market assets.

The fund’s strategy is to invest in the subordinated debt of infrastructure providers based in the OECD region, reflecting the low level of risk being sought. Typically, infrastructure investment in developed countries differs from that in Asia by virtue of the fact that it is already in place and generally operational, rather than greenfield or new build.

Demand for the new fund has come from investors worldwide, including regional interest from China’s largest insurance company, China Life, and institutions in Australia, Hong Kong and Japan.

The fund is targeting a 10-12.5% internal rate of return and a cash yield of 9-11% on a gross basis. AMP, which has A$98 billion ($102 billion) in assets under management, declined to disclose the pricing structure of the fund regarding its net returns.

As the fund does not target equity upside, it is less attracted to high-growth countries. Also, because it invests in subordinated debt, investments also receive a measure of income from cash coupons, a very attractive feature for certain infrastructure investors.

“AMP Capital targets subordinated debt, as we are able to generate very attractive yield-based returns far in excess of a senior bond and without the volatility of an equity position," says an AMP spokesman.

"Given relatively low levels of competition in the subordinated space, we are able to secure returns which look very attractive relative to both bonds or equity on a risk-adjusted basis," he says, adding that the fund is targeting second-ranking secured positions in the capital structure.

The fund plans to accumulate a portfolio of subordinated debt in 10 to 15 companies across all the standard infrastructure sub-sectors. It will seek assets in regulated industries with high barriers to entry, visible cashflows and a strong industry position.

The fund has already made its first investment, a $65 million loan to a leading UK-based rolling-stock company, which leases trains and freight locomotives.