KKR & Co. set high expectations in 2008 when it formed a group to invest in toll roads, ports and pipelines. It aimed to raise as much as $4 billion and hired George Bilicic, the Lazard Ltd. banker on the firm's record buyout of power producer TXU Corp., to lead the effort. Almost two years after the launch, New York-based KKR hasn't announced any major investors or made an infrastructure acquisition, while Bilicic returned to Lazard within a few months.

The firms see infrastructure funds as a way to provide states and cities with much-needed capital to maintain crumbling facilities in return for revenue that's less vulnerable to the kind of slump that hit traditional leveraged buyouts from mid- 2007 through last year. The gap between what governments are expected to allocate on infrastructure and what they'll need to spend in the next five years is $1.1 trillion, according to the American Society of Civil Engineers in Reston, Virginia.

Infrastructure transactions fell to a four-year low of 130 in 2009, according to research firm Preqin Ltd., amid a lack of investor interest in new funds and credit from banks. Private- equity firms raised $246 billion for all strategies last year, the least since 2005, according to the London-based firm.

However, KKR and Blackstone still said they are committed to making infrastructure investments and expect their expertise in running companies to make the funds successful. "The global need for these investments, combined with the more limited availability of capital from traditional sources such as governments, will drive significant demand for private capital in infrastructure," said Raj Agrawal, a member of KKR's infrastructure team based in Palo Alto, California.

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Posted by mopeng at March 4, 2010 6:24 PM