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Exclusive: Macquarie eyes $2 billion infrastructure fund-sources

By Greg Roumeliotis

NEW YORK (Reuters) - Australia's Macquarie Group Ltd , the world's largest manager of infrastructure assets, is preparing to raise a $2 billion infrastructure fund in 2012, its third focused on the United States and Canada, people familiar with the matter said.

Macquarie is planning to start fundraising this year, as its second $1.6 billion North American infrastructure fund was fully invested, the people said.

Macquarie declined to comment.

Planning for such a fund comes at a time when political wrangling in Washington and local government budget shortfalls have put spending on infrastructure projects at risk, prompting some politicians to think about partnering with the private sector.

Chicago Mayor Rahm Emanuel last week turned to the private sector to finance $7.2 billion in rebuilding of the city's aging subways, sewers and schools.

But in the United States, Macquarie also faces a market that has long been stymied by political bickering, a multilayered planning bureaucracy, opposition by labor unions and consumer groups to privatization, and a competitive municipal bond market.

Even in Chicago, a 75-year lease of the city's parking meter system in 2008 for a one-time $1.15 billion payment was sharply criticized as fees went up.

Overall, the United States' record in encouraging private investment in infrastructure such as roads, tunnels and bridges lags behind Europe and Australia, according to the Organisation for Economic Co-operation and Development, which in a September report called the U.S. infrastructure market "immature."

BET ON INFRASTRUCTURE

Macquarie has managed to defy some of these issues. The bank has averaged gross internal rates of return of more than 20 percent in its North American infrastructure investments.

Macquarie raised $4 billion for its infrastructure and real estate funds globally in 2011. It had $317 billion in assets under management as the end of September.

The firm is betting on a vibrant market for privatized infrastructure assets that are set to change hands. Of the major U.S. infrastructure deals completed in 2010 and 2011, 64 percent were transactions in the secondary market, according a February report by PricewaterhouseCoopers.

Macquarie has also proved successful in bidding for the few new assets on the market.

It was behind the largest U.S. infrastructure deals of the last two years -- a $2.1 billion project to build and operate commuter rail lines to Denver International Airport and a $1.7 billion upgrade of a tunnel between the cities of Norfolk and Portsmouth in Virginia.

Macquarie's competitors include infrastructure funds sponsored by other banks such as JPMorgan Chase & Co and Goldman Sachs Group Inc , private equity firms such as Carlyle Group LP and KKR & Co LP , and independent managers such as Global Infrastructure Partners and Alinda Capital Partners LLC.

Although those investment firms also do U.S. infrastructure deals, none of them do so with a dedicated fund.

Infrastructure funds -- private equity-type vehicles investing in infrastructure assets -- raised an aggregate $16 billion in 2011, down 49 percent from 2010, according to market research firm Preqin.

(Reporting by Greg Roumeliotis in New York; Editing by Lisa Von Ahn, Paritosh Bansal, Dave Zimmerman)

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