Macquarie cuts commitments from fund investors after oversubscription

Macquarie Group has closed its latest European infrastructure fund in the first round of fund-raising after attracting more than its target funding, and told all participants in Macquarie European Infrastructure Fund 5 (MEIF5) to shed their commitments by 15%, according to South Korean pension and savings fund sources last week.

The Australian bank kicked off the fund-raising of MEIF5 in March, and had initially drawn €4.6 billion, above its target of €3.5 billion. After the Brexit vote in June, an unidentified big U.S. institutional investor expressed an intention to make a heavy investment of an undisclosed sum, leading to the oversubscription.

“We were told by Macquarie to cut the size of our commitment by 15%,” one of the sources told the Korea Economic Daily. “Big fund-raising is generally completed in stages. But the Macquarie European Infrastructure Fund has raised the target money in the first round, which is a rare case,” said another source.

The sources added that Macquarie had told all investors in the new fund, including the National Pension Service (NPS) and the Military Mutual Aid Association (MMAA) of South Korea, to slash their commitments by the same amount. But it is not known yet if the unidentified big U.S. institutional investor was also required to cut back on investment in the MEIF5.

Macquarie is known to have lifted the size of MEIF5 to €4 billion.

The fund will invest in infrastructure assets across Europe, including utilities and communication and transport facilities. In particular, it is expected to benefit from the Juncker Plan, the European Commission’s large-scale infrastructure investment plan.

NPS had initially allotted €250 million for the fund, while MMAA earmarked €50 million, bigger than the previously-reported €40 million.

The Korea Scientists and Engineers Mutual-aid Association and the Yellow Umbrella Mutual Aid, a South Korean savings fund for small-sized business owners are also to slash their commitment by 15% from their initially-planned €30 million, respectively.

The Korea Teachers’ Credit Union, which had considered investing in the fund, has decided not to participate because of the earlier-than-expected closing of the fund.

The 15% annual return of MEIF4, the predecessor of MEIF5, and stable incomes from a string of infrastructure funds fueled interest in the latest Macquarie fund. Upcoming privatization plans and renewable energy-supportive policies in Europe added to optimism about Europe’s infrastructure assets.

By Daehun Kim and Chang Jae Yoo

daepun@hankyung.com