Building funds: Infrastructure bonds

Private equity in Mexico has achieved over $42.5bn in capital commitments over the past 16 years, expanding at a compound annual growth rate of 20.27%. In 2016 nine development capital certificates ( certificados de capital de desarrollo, CKDs) were issued, three of which were for infrastructure and energy, two for real estate, one for venture capital and three for private equity. Additionally, the newly introduced real estate investment trusts (fideicomiso de inversión y bienes raíces, FIBRAs) for energy and infrastructure assets, or FIBRA E, and one investment project certificate, or certificado de proyecto de inversión (CerPI) were also floated in 2016.

Development Certificates

CKDs are publicly floated instruments through which private equity funds raise money via institutional investors, typically public pension funds, with a mid- to long-term view under the fund administrator’s investment strategy. The administrator comprises a group of sector specialists that originate, analyse, structure, negotiate and close investment opportunities. They also administer ventures during each operating phase and ultimately divest projects with the goal of achieving attractive returns. Infrastructure CKDs in Mexico have been key in financing greenfield and brownfield schemes, allowed investors to match long-term resources with long-term projects in sectors such as infrastructure, and thus better aligning supply and demand.


A commonly used model in Mexico to develop infrastructure is public-private partnerships (PPPs). The promoting government entity defines the construction, operation and maintenance requirements of a project that it consolidates through a contract with a private sector supplier. The private partner invests resources in the development, and in turn receives a structured payment during the operating and maintenance periods. CKDs are an instrument that allows for financing of the equity portion required by such PPPs. According to the Mexican Private Equity Association, by the end of 2016 there were eight infrastructure and energy active funds in the country.

Infrastructure Fund

With a focus on low-risk investments primarily in social infrastructure, transport and energy, the Infrastructure Capital Fund (Fondo Capital Infraestructura, FCI) was established in 2016. The FCI kicked off its formal offering process through a CKD public issuance in June 2015, when it first registered with the National Securities and Banking Commission and the Mexican Stock Exchange. Then, in August 2016 the FCI successfully floated a CKD worth MXN3.5bn ($210.9m).

Among the key elements that caught investors’ eyes, two were particularly compelling. First, the FCI has a differentiated business model and participates in infrastructure projects at the federal, state and municipal levels, as well as in private schemes. Consequently, it seeks out different types of investment opportunities when compared to other funds in Mexico which tend to invest in projects at the federal level. Second, the FCI focuses on projects with low or no commercial risk, generating an interesting risk-return relationship. It seeks projects that directly or indirectly structure offers so there is little federal risk, as well as small and mid-sized projects with less competition. The FCI invests up to MXN700m ($42.2m) per ticket.

The fund also offers a new investment vehicle in the form of a diversified portfolio of projects that it would typically not have access to. It is also taking advantage of government cutbacks due to falling oil prices, as this requires greater participation by the private sector in developing infrastructure projects. The FCI is focused on five subsectors: social infrastructure, water supply, energy, transportation, and oil and gas. It invests through equity, equity-linked and subordinated debt structures. As of the third quarter of 2016, one month after the CKD was floated, the FCI had visibility of 46 investment projects that represented potential capital requirements worth MXN14.1bn ($849.8m).