Harnessing Network Effects in Infrastructure Investment

Welcome back to the Alt Goes Mainstream podcast.

Today’s episode dives into the evolution of infrastructure investing with the leading scaled specialist firm in infrastructure.

We sat down in Stonepeak’s Hudson Yards office with the firm’s Co-President Luke Taylor to discuss the inner workings of the infrastructure investing world and unpack the story of how Stonepeak’s rapid ascent has seen the firm climb to $76.3B in AUM in 14 short years.

Luke brings a wealth of experience to the infrastructure investing world. He is Co-President of Stonepeak and a member of all of the firm’s investment committees. He’s been investing in infrastructure for over 20 years, joining Stonepeak from infrastructure investing pioneer Macquarie Capital.

Luke and I had a fascinating and thought-provoking discussion about infrastructure investing and why it’s becoming an increasingly important part of the private capital ecosystem. We covered:

• How Luke went from growing up on a sheep farm to investing in infrastructure in New York.
• What Macquarie taught him about how to approach infrastructure investing.
• Why he took the entrepreneurial leap to build Stonepeak and join Chairman, CEO, and Co-Founder Mike Dorrell from the firm’s earliest days.
• Why infrastructure investing is more than toll roads, airports, and bridges.
• How there are elements of a private equity approach to investing in, building, and operating infrastructure assets.
• Where infrastructure fits in an investors’ portfolio.
• Why individual investors should consider exposure to infrastructure assets.
• Has infrastructure proved itself through an inflation cycle?
• Why scale matters in infrastructure investing.
• How Stonepeak identified investing in data centers early on and well before the data center boom began.
• What type of demeanor and mindset makes for a successful infrastructure investor.

Thanks Luke for coming on the show to share your expertise, wisdom, and passion for infrastructure investing.

A word from AGM podcast sponsor, Ultimus Fund Solutions

This episode of Alt Goes Mainstream is brought to you by Ultimus Fund Solutions, a leading full-service fund administrator for asset managers in private and public markets. As private markets continue to move into the mainstream, the industry requires infrastructure solutions that help funds and investors keep pace. In an increasingly sophisticated financial marketplace, investment managers must navigate a growing array of challenges: elaborate fund structures, specialized strategies, evolving compliance requirements, a growing need for sophisticated reporting, and intensifying demands for transparency.

To assist with these challenging opportunities, more and more fund sponsors and asset managers are turning to Ultimus, a leading service provider that blends high tech and high touch in unique and customized fund administration and middle office solutions for a diverse and growing universe of over 450 clients and 1,800 funds, representing $500 billion assets under administration, all handled by a team of over 1,000 professionals. Ultimus offers a wide range of capabilities across registered funds, private funds and public plans, as well as outsourced middle office services. Delivering operational excellence, Ultimus helps firms manage the ever-changing regulatory environment while meeting the needs of their institutional and retail investors. Ultimus provides comprehensive operational support and fund governance services to help managers successfully launch retail alternative products.

Visit www.ultimusfundsolutions.com to learn more about Ultimus’ technology enhanced services and solutions or contact Ultimus Executive Vice President of Business Development Gary Harris on email at gharris@ultimusfundsolutions.com.

We thank Ultimus for their support of alts going mainstream.

Show Notes
00:00 Introduction and Sponsor Message

01:18 Podcast Opening and Theme

01:55 Episode Overview: Infrastructure Investing

02:04 Guest Introduction: Luke Taylor

02:45 Luke Taylor's Background and Journey

04:49 Early Days at Macquarie

07:19 Transition to Stonepeak

08:04 Building Stonepeak 

10:13 Value Creation in Infrastructure

11:59 Mindset of an Infrastructure Investor

13:08 Balancing Long-Term and Agile Thinking

15:42 Key Drivers of Value Creation

16:10 Underwriting and Risk Management

18:00 Operational Intensity and Asset Utilization

21:51 Network Effects in Infrastructure

23:19 Infrastructure as a Defensive Investment

26:13 Portfolio Construction and Infrastructure

26:39 Private Infrastructure and Yield Benefits

27:29 Productizing Infrastructure Investments

27:41 Equity, Credit, and Real Estate Strategies

29:23 Thematic and Opportunistic Investing

29:53 Data Centers and Early Investments

30:06 Identifying Investment Opportunities

30:14 Evolution of Data Centers

30:58 Interconnection Hubs and Carrier Hotels

31:32 AI Boom and Data Centers

33:22 Investing in AI Through Infrastructure

34:42 Underwriting AI Thematics

35:04 Capital Needs in Data Centers

35:32 Downside Protection in AI Investments

36:49 Navigating Increased Capital in Infrastructure

37:35 Durability of Cash Flow in Infrastructure

38:40 Scaling Stonepeak's Infrastructure Investments

39:18 Diversification in Infrastructure Investments

41:47 Developing an Edge in Origination

42:36 Structural Elements in Deal Sourcing

42:57 Competition and Market Structure

43:26 New Entrants in Infrastructure

43:44 Building New Assets in Infrastructure

43:54 Exits and Evergreen Funds

46:27 Private Wealth and Infrastructure

51:25 Challenges in Starting a Wealth Business

51:51 Deal Flow and Product Construction

53:50 Volatile Markets and Opportunities

54:20 Interest Rate Risks in Infrastructure

55:18 Favorite Infrastructure Opportunities

57:01 Closing Thoughts and Full Circle

Editing and post-production work for this episode was provided by The Podcast Consultant.