CaseMark Structuring Infrastructure Fund Terms
Designs infrastructure fund structures with longer fund lives, NAV-based distributions, and co-investment programs for illiquid assets.
When To Use
- Structuring a new closed-end or open-end infrastructure fund (greenfield, brownfield, or core/core-plus)
- Designing fund life, extension, and recycling provisions for long-duration assets (toll roads, airports, utilities, renewables)
- Setting NAV-based distribution waterfalls, preferred return mechanics, or hybrid carried-interest structures
- Building co-investment and sidecar vehicle terms alongside a main fund
- Benchmarking proposed LP terms against market norms for infrastructure vintages
- Evaluating GP commitment, fee structures, and alignment mechanisms for infrastructure mandates
Inputs To Gather
- Fund strategy and asset profile: Core/core-plus/value-add/opportunistic; target sectors (transport, energy, digital, social); greenfield vs. brownfield mix; geography
- Target fund size and LP base: Anchor LP requirements, sovereign wealth fund or pension mandates, minimum ticket sizes
- Fund life parameters: Proposed investment period, fund term, number and length of extensions, recycling rights
- Return targets: Target net IRR, cash yield expectations, preferred return rate, catch-up and carried interest split
- Fee structure inputs: Management fee basis (committed vs. invested capital), step-down schedule, transaction/monitoring fee offsets
- Co-investment program scope: Allocation policy, fee/carry treatment for co-investors, sidecar structuring preferences
- Distribution preferences: Cash vs. in-kind, NAV-based redemption mechanics (for open-end), distribution frequency, reinvestment elections
- Regulatory and tax constraints: Domicile jurisdiction, AIFMD/SEC registration status, tax-exempt LP structuring needs, UBTI/ECI considerations [VERIFY]
Workflow
Classify strategy and vehicle type
- Determine closed-end vs. open-end vs. semi-liquid structure based on asset duration and LP liquidity needs
- For closed-end: set investment period (typically 3–5 years for infra), fund term (12–15+ years with extensions), and recycling parameters
- For open-end: define subscription/redemption windows, lock-up periods (commonly 1–3 years), redemption queue mechanics, and NAV calculation methodology
Design the economic waterfall
- Set preferred return (typically 6–8% for core infra; 8–10% for value-add) [VERIFY against current market]
- Structure carry: standard 80/20 after pref with GP catch-up, or tiered carry (e.g., 10% carry to 12% IRR, 20% above)
- Decide whole-fund vs. deal-by-deal carry — whole-fund is market standard for infra given long hold periods
- Define distribution policy: quarterly cash distributions from yield-generating assets vs. lumpy capital gains on exits
- For NAV-based vehicles: specify NAV calculation frequency, independent valuation cadence, and distribution-per-unit mechanics
Set fee terms
- Management fee: typically 1.25–1.75% on committed capital during investment period, stepping down to invested capital or lower rate post-investment period [VERIFY market benchmarks]
- Address fee offsets: 80–100% offset of transaction, monitoring, and directors' fees against management fees
- Organizational expense cap: market range $2–5M depending on fund size
- Define GP commitment: typically 2–5% of total commitments; specify whether funded in cash or via management fee waiver
Structure co-investment and sidecar terms
- Allocation policy: pro-rata vs. discretionary; minimum deal size thresholds for offering co-invest
- Fee and carry on co-investments: no-fee/no-carry is LP expectation for most infra co-invest; document exceptions
- Sidecar vehicles: define governance, information rights, and transfer restrictions
- Address conflicts: specify how GP resolves allocation between main fund, co-invest vehicles, and successor funds
Draft governance and LP protections
- LPAC composition, quorum, and scope of authority (conflicts, valuation, extensions, key-person events)
- Key-person provisions: identify named individuals, define trigger consequences (investment period suspension vs. cause event)
- No-fault removal and dissolution rights: supermajority thresholds (typically 66.7–75%)
- Excuse and exclusion rights for regulatory or legal restrictions (important for sovereign and public pension LPs)
- ESG/sustainability reporting commitments — increasingly expected for infra funds (SFDR classification, GRESB participation) [VERIFY applicable framework]
Address infrastructure-specific provisions
- Recycling rights: specify what proceeds may be reinvested (return of cost only vs. cost plus realized gains), time limits, and aggregate cap
- Concentration limits: per-asset, per-sector, per-geography caps
- Leverage limits: fund-level subscription lines and asset-level project finance parameters
- Valuation methodology: DCF-based with independent appraiser; define frequency (quarterly marks, annual full valuation)
- Insurance and force majeure provisions relevant to physical asset portfolios
Output
Deliver a structured infrastructure fund terms report containing:
- Executive summary: Fund strategy, target size, vehicle type, and key economic terms at a glance
- Fund structure and life: Vehicle type, domicile, term, extensions, investment period, recycling
- Economics table: Preferred return, carry structure, management fees, GP commitment, fee offsets — presented in a comparison format against market benchmarks where available
- Distribution mechanics: Waterfall diagram or step-through, NAV-based distribution details if applicable
- Co-investment program: Allocation policy, fee/carry treatment, sidecar structure summary
- Governance framework: LPAC terms, key-person, removal rights, reporting obligations
- Infrastructure-specific terms: Concentration limits, leverage parameters, valuation approach, recycling
- Open items and negotiation points: Flag terms where GP/LP positions typically diverge with suggested ranges
Quality Checks
- Confirm waterfall math is internally consistent — preferred return, catch-up, and carry percentages must produce correct splits at sample return scenarios
- Verify fee step-down triggers align with investment period end and any extension mechanics
- Ensure co-investment allocation policy does not conflict with main fund concentration limits
- Check that fund life and extension provisions give adequate runway given typical infra asset hold periods (7–15 years per asset)
- Confirm NAV calculation and distribution mechanics are consistent (e.g., no conflict between quarterly distributions and semi-annual NAV)
- Validate that GP commitment and clawback provisions are sufficient to maintain alignment
- Mark all jurisdiction-dependent items (tax structuring, regulatory classification, ESG framework) with [VERIFY]
- Cross-check proposed terms against ILPA principles and current infra fund market standards