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Union Investment moves into infra with €300m fund

The German asset manager has reached a first close on €50m for its debut infrastructure fund - a renewable vehicle primarily targeting wind farms across Europe.

German asset manager Union Investment is diversifying its business into the infrastructure space with the launch of its first renewable energy fund, targeting institutional investors, reported PERE's sister publication Infrastructure Investor.

The renewable fund has reached a first close on circa €50 million and is targeting a final close of some €300 million.

The new vehicle plans invest 70 percent of the equity raised in wind farms primarily located in Germany, France and the UK, although Union is also open to investing in Scandinavia and Poland on a “selective basis”.

The remaining 30 percent of the capital raised is earmarked for solar photovoltaic projects. At the end of the fund’s three-year investment period, Union wants to have over 20 onshore wind farms in its portfolio alongside an undisclosed number of solar projects. The fund plans to offer an average long-term yield of six to eight percent.

The new vehicle is Union’s first step into the infrastructure space, but the German asset manager hints it will offer other products in the sector.

“We want to gradually open up the infrastructure segment for our investors by means of this product, which focuses on the technologies of the future,” commented Christoph Schumacher, a member of the management team at Union Investment Institutional Property, which is supporting the new investment concept in a service provider role.

Schumacher was the former head of indirect investments at Generali Deutschland Immobilien, the insurance group’s asset manager, for six years until he left in early 2011. At Generali, Schumacher was enthusiastic about infrastructure, and was one of the voices calling for the establishment of an LP platform for infrastructure similar to real estate’s INREV or private equity’s PEIA at Infrastructure Investor: Europe 2010.

“We deliberately chose wind energy as the focus when designing the product due to the economies of scale,” explained Schumacher. “With geothermal power the economic benefits are still questionable relative to the high costs and risks incurred in test drillings, while the market for biogas plants is simply too small at present,” he added.