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Fundraising in infrastructure | UBS Norway

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With infrastructure dry powder, there is a need to deploy capital

In our industry, fundraising leads to deals, and deals lead to more fundraising. That mechanism, however, took a pause last year with 2023’s weak fundraising, which led to a slow year for deals. With more than USD 300 billion of infrastructure dry powder, there is increasing urgency to deploy capital this year. This is particularly true for strategies that raised money during the record-setting 2021 and 2022, as further delays in dealmaking would erode overall fund-life IRRs.

On the other side, sellers who have been dragging their feet due to the recent macro uncertainties are restarting their sales processes, especially for disposals that must happen for strategies near the end of their fund lives.

With the stabilization of interest rates and inflation, markets have time to adjust to the new normal. It should become easier for both buyers and sellers to underwrite transactions. We have already seen a pick-up in multi-billion dollar deals in the market, and we are optimistic the improvements in sentiment will drive increased activity and close the wide bid-ask spread we saw last year.

The types of deals in the market also matter. For example, offshore wind is gaining some positive momentum, with new auctions and transactions being announced. This is particularly notable, since the sector was arguably one of the most troubled verticals in 2023, with a slew of negative headlines around project delays and cost overruns. A restart in deal activity for an industry that has faced significant headwinds is another sign that the “animal spirits” and risk appetite are returning.

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