I Squared Capital closes $3bn infrastructure credit fund above target

Private equity firm I Squared Capital has successfully closed its second infrastructure credit fund, raising $3bn, which exceeded its initial fundraising goal of doubling. This growth is attributed to increased allocations to infrastructure debt by institutional investors, as reported by Bloomberg. The newly established ISQ Global Infrastructure Credit Fund II has attracted commitments from various types of investors, such as insurance companies, sovereign wealth funds, and pension funds from both the US and international markets.

The size of this fund is four times larger than its predecessor, and it aims to generate returns of between 9% and 11%. The fund will focus on providing predominantly senior secured loans to businesses that own and operate essential infrastructure, including power grids, data centres, fibre networks, ports, and terminals. These individual investments are anticipated to range from $150m to $400m, with the loans secured against physical assets and backed by contracted or regulated cash flows.

I Squared Capital, which manages around $60bn in assets, is targeting opportunities across North America and Europe as the demand for infrastructure financing is accelerating. The growth of the fundraise aligns with increasing capital needs facilitated by factors such as investment in artificial intelligence, expanding energy requirements, reshoring of manufacturing, and ageing infrastructure.

The successful fundraising follows Carlyle's recent closing of a $2.3bn second infrastructure credit fund in September, indicating a growing institutional appetite for asset-backed lending strategies that offer exposure to long-term infrastructure investments.