The private equity arm of French insurance giant AXA has raised 1.75 billion euros ($2.3 billion) for investments in European infrastructure, in a further sign of buoyant demand for road, rail and energy assets.
The AXA Infrastructure Fund III, the group's largest to date, closed with 1.45 billion euros while investors committed a further 300 million euros for investments outside the fund.
Mathias Burghardt, Head of Infrastructure at AXA, told Reuters investors had bought into the fund because of the stable yields on offer from European infrastructure and the relative safety it offered from the region's macroeconomic woes.
"We see a lot of new investors looking for diversification. They want to be in an asset class that has low correlation with other asset classes and protects against inflation," he said.
"Sophisticated investors today understand that Europe provides the most attractive deal flow opportunities to build a core infrastructure portfolio."
German investors had become the largest backers of the latest fund, Burghardt said, while Asian clients had also provided more cash.
The fund will look for deals in the gas and electricity grid and renewable energy sectors, as well as road and rail assets, but will steer clear of ports because they are too cyclical, Burghardt said.
Investors are pouring money into infrastructure just as cash-strapped governments rush to privatize assets and corporations exit non-core businesses, boosting supply.
According to data firm Preqin, infrastructure funds pulled in $25.3 billion last year, about $3 billion more than 2011 but down on 2010. Since 2008 investors have put $134.2 billion into unlisted infrastructure funds.
Burghardt said "massive disposal programs" from European utilities like EON and RWE would aid dealflow further.
"The supply-demand pattern is quite good, a lot better than it used to be," he added.
The AXA fund has already sealed four deals, including acquiring a stake in Luxembourg power generator, transmission group Enevos and Austrian group Verbund's French wind farms.
AXA was also in the running to buy the TIGF gas network business of France's Total last year but lost out to Italian gas grid operator Snam .
(Reporting by Tommy Wilkes; Editing by Helen Massy-Beresford)