Global Infrastructure Partners bought Italy’s second-largest high-speed train operator, known as Italo, earlier this year.


Photo:

miguel medina/Agence France-Presse/Getty Images

Private-equity firms are on track to raise a record amount for infrastructure investing in 2018, as money managers bet on the growing need to upgrade and expand the world’s railroads, natural-gas pipelines and data centers.

The firms collectively raised $68.2 billion in the first three quarters of the year, up 18% over the same period in 2017 and already surpassing the $66.2 billion they amassed in all of 2016, according to data from Preqin.

Leading the charge are

KKR


KKR -2.64%

& Co., Stonepeak Infrastructure Partners and I Squared Capital, which each raised a roughly $7 billion investment vehicle this year.

The numbers are set to swell even more as the total doesn’t include the $5 billion raised so far by

Blackstone Group


BX -0.93%

LP in the initial phase of its planned $40 billion infrastructure fund. Meanwhile, two infrastructure powerhouses, Global Infrastructure Partners and Brookfield Infrastructure Partners, which raised $15.8 billion and $14 billion funds, respectively, in 2016, are already targeting new pools of roughly $20 billion each.

Institutional investors such as pension funds have been allocating more money to infrastructure, attracted by its reputation for steady returns, which typically fall between safer fixed-income securities and riskier private equity. That is especially appealing with interest rates still near historically low levels and equity prices close to all-time highs.

Achieving those returns, however, is no slam-dunk. There is now a lot of cash chasing a limited number of opportunities, which has led to worries that infrastructure funds will struggle to find places to put their billions to work or pay too dearly to do so. But private-equity officials argue that technological change in telecommunications and energy and the need to upgrade aging railways and other transportation assets create more than enough demand for their capital.

The U.S. is the largest market for energy-infrastructure assets, which by and large aren’t owned by the government. The energy industry’s fracking revolution and the country’s shift to being a net exporter of natural gas, as well as the boom in green-energy projects, have created new opportunities for investment. KKR said in July it had agreed to acquire Discovery Midstream Partners, which gathers and processes natural gas, for about $1.2 billion through a newly formed joint venture with energy company

Williams
Co

s.

The digital revolution, meanwhile, has attracted attention to U.S. telecommunications assets like cell towers and data centers. In June, Brookfield agreed to buy 31 of

AT&T
Inc.’s

data centers in a deal worth $1.1 billion.

The firms with the largest funds argue that their growing scale creates new opportunities by giving them access to deals smaller funds couldn’t do.

Blackstone


BX -0.93%

is looking at assets that enable it to invest at least $1 billion, including a number of publicly traded companies, according to a person familiar with the buyout firm’s strategy.

The fundraising spree comes despite a lack of progress on infrastructure legislation in Washington. President Trump campaigned on the promise of a $1 trillion plan for U.S. infrastructure and rolled out a proposal earlier this year. The initiative faced congressional opposition from the outset in large part because it would require states and cities to come up with their own money for improving highways, airports and water systems.

The White House has since shifted its focus to other priorities such as trade. In July, Stonepeak announced that DJ Gribbin, formerly Mr. Trump’s top infrastructure adviser, would join the firm as a senior operating partner.

Funds such as those run by Stonepeak and Blackstone, which are primarily concentrated on North America, say they will likely focus more on energy and telecom than on transportation, much of which falls into the public-asset category.

In the U.S., privatizing public assets like toll roads, bridges and airports has long been difficult because of cheap funding alternatives such as municipal debt and the challenges of navigating local politics. But other spheres of the infrastructure market are flourishing, deal makers say.

“If you want to privatize a toll road in a major urban city in the U.S., that becomes a very difficult transaction to do,” said Robert Palter, co-leader of the global capital projects and infrastructure practice at consulting firm McKinsey & Co. “If you talked about a different variety of infrastructure such as acquiring private ports or railroads, those are deals that are getting done.”

Governments outside the U.S. are more open to private capital, giving firms such as GIP, Brookfield and KKR with global funds the opportunity to privatize assets there. GIP bought three U.K. airports, two of which it still owns, and transformed their terminals into shopping malls. Many large transportation deals abroad involve assets that are not government owned. In April, GIP purchased Italy’s second-largest high-speed train operator, known as Italo, for €1.98 billion ($2.3 billion).

There have been some examples of U.S. public-private partnerships.

Carlyle Group

LP is investing in the redevelopment and expansion of Terminal 1 at New York’s John F. Kennedy Airport, for example.

Some are still holding out hope that the funds will be put to use fixing America’s problem-plagued public-transportation systems.

“In the end, the reality is that U.S. infrastructure is still woefully maintained,” said Mark Weisdorf, the former chief executive of the infrastructure-investments platform at J.P. Morgan Asset Management, who now runs a strategic-consulting firm. “Eventually stuff gives and things happen. That catalyst may still come.”

Write to Miriam Gottfried at Miriam.Gottfried@wsj.com

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