Apollo Seeks Up to $3 Billion for Its Second Infrastructure Fund

(Bloomberg) -- Apollo Global Management Inc. is seeking as much as $3 billion for its second infrastructure fund, according to people with knowledge of the matter.

The firm has been talking with prospective investors about raising $2 billion to $3 billion for Apollo Infrastructure Opportunities Fund II LP, said the people, who asked not to be identified because the talks are private. The fundraising target is fluid and may change based on investor demand, one of the people said.

The fund is planning on annual returns of 13% to 16% before fees, some of the people said. It will use Apollo's structuring expertise to ensure downside protection across all deals, one of them said.

An Apollo spokeswoman declined to comment.

“We remain in the market for real assets-related strategies such as infrastructure equity and U.S. and Asia real estate, all of which are seeing attractive opportunities emerge in distressed, stressed and capital solutions,” Apollo co-founder Josh Harris said on the firm's first-quarter earnings call last week, without providing specifics.

The New York-based firm last month named veteran energy executive John MacWilliams, a former U.S. Department of Energy associate deputy secretary, as an operating partner focused on infrastructure and natural resources.

“Many fundamentally strong infrastructure assets face liquidity issues from the current crisis, including demand-driven transport assets such as airports and toll roads,” Dylan Foo, co-lead of Apollo's infrastructure team alongside Geoffrey Strong, said at the time. The firm raised about $1 billion for its first fund, and focuses on infrastructure sub-sectors including transportation, communications, midstream energy, power and renewables.

Infrastructure funds have been a beneficiary of private capital as investors seek to hedge against inflation and counterbalance the substantial but unpredictable payouts associated with other alternative asset classes such as venture capital and private equity, according to data provider Preqin.

The number of active fund managers dedicated to the sector climbed to a record, surpassing 700, which in turn has increased competition for deals, Preqin said.