(Bloomberg) — US credit firm Muzinich & Co. and Orion3, an Asian alternative investment platform, have launched an infrastructure and real assets private debt strategy as they seek to tackle the sector’s global funding gap.
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The fund strategy, which launched Monday, secured its first $120 million investment, said Andrew Tan, Muzinich’s Asia Pacific chief executive officer. Tan added that the firm is aiming to raise between $500 million to $1 billion for the vehicle, while targeting a net return in the low teens on a blended basis.
The new venture between the New York-based company and Orion3, backed by Hong Kong developer CK Asset Holdings Ltd., comes amid a growing gap between funding needs and availability for global infrastructure investment. The disparity is predicted to widen to around $15 trillion by 2040, according to a Global Infrastructure Hub report.
Muzinich has come across many infrastructure deals that do not have access to bank funding, said Tan. This new strategy seeks to capitalize on this opportunity — “to provide financing in the capital structure and still get a very good risk-adjusted return for these investments,” he said.
This funding gap presents the private credit market with potential financing opportunities in infrastructure of around $1.5 trillion over a five-year time horizon, according to a white paper published by Ares Management Corp in February.
Muzinich’s latest strategy follows other established private equity players’ forays into the sector. BlackRock Inc. last month raised the first $1.3 billion of its Global Infrastructure Debt Fund II, while Brookfield Asset Management Ltd. secured over $6 billion in its final fundraising exercise for its infrastructure debt fund in November.
Muzinich’s strategy will focus on investments from developed Asian and Western countries, including Australia, the UK, South Korea and Japan, Tan said. Deals will range from senior secured bridge financing to capital expansion, with a target size of $15 million to $75 million per transaction, he said.
Fundraising for the new strategy is underway and will target institutional investors, family offices and high-net-worth individuals across Asia, Europe and North America, said Harry Chang, co-founder and chief financial officer of Orion3.
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