Major Risks in Infrastructure Underwriting

Welcome back to the Alt Goes Mainstream podcast.

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

We sat down in Stonepeak’s Hudson Yards office with a pioneer in infrastructure investing: Mike Dorrell.

Mike is the Chairman, CEO, and Co-Founder of Stonepeak, building the foundations for the firm to achieve a rapid ascent to $76B from its founding in 2011.

Mike brings deep expertise to bear in the infrastructure asset class. He has over 20 years of experience investing in infrastructure, starting his career at Macquarie, where he ultimately held the title of Senior Managing Director. He then joined Blackstone, where he was a Senior Managing Director in Private Equity and Co-Head of the Infrastructure Investment group, before striking out on his own to build one of the industry’s largest infrastructure investing firms in Stonepeak.

Mike 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:

• The early days of infrastructure investing.
• How infrastructure investing has evolved.
• How Mike’s experiences at Macquarie and Blackstone informed how he wanted to build Stonepeak.
• How institutional investors have approached infrastructure investing and why individual investors should consider exposure to infrastructure assets.
• Stonepeak’s DNA and what makes the firm different from other infrastructure investors.
• Why being a scaled specialist is a competitive advantage.
• How Stonepeak was built from scratch to scale.
• How Stonepeak identified investing in data centers early on and well before the data center boom began.
• Why launch a wealth solutions business and how it’s a reflection of the firm’s DNA, culture, and values.

Thanks Mike 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 Message from our Sponsor, Ultimus

01:18 Welcome to the Alt Goes Mainstream Podcast

02:10 Guest Introduction: Mike Dorrell

03:58 Mike's Journey to Stonepeak

06:46 Challenges in the US Infrastructure Market

11:09 Successes and Setbacks in Infrastructure Deals

12:06 Privately Held Infrastructure in the US

17:05 Public vs. Private Infrastructure

18:34 Impact of Infrastructure on Daily Life

19:16 Stonepeak's Significant Market Presence

22:10 Balancing Public Good and Investor Returns

22:53 Regulation and Good Judgment in Infrastructure

23:55 Challenges in Privatization

25:52 Skills Needed for Infrastructure Investing

26:29 Access to Infrastructure for Individual Investors

27:10 Institutional Market's Experience with Infrastructure

30:50 Asset Allocation and Infrastructure

33:40 Private Equity vs. Infrastructure Investments

34:10 Institutional Allocation Trends

34:46 Patience and Peace of Mind in Investing

35:14 Warren Buffet's Investment Philosophy

35:38 Biggest Risks in Infrastructure

35:50 Electric Utility Asset Risks

36:28 Data Center Business Risks

37:02 Evaluating Data Center Investments

38:46 Economic Differences: Building vs. Buying Data Centers

40:21 Pricing Power in Data Centers

46:03 Connectivity Data Centers Explained

49:16 Navigating Infrastructure as an Asset Class

50:09 Finding the Right Assets at Fair Prices

50:27 The Evolution of Infrastructure Investing

53:31 Founding Stonepeak

57:20 Raising Capital in Early Days

59:46 Lessons from Blackstone

01:01:22 Building a Strong Investment Culture

01:03:37 Maintaining Culture While Scaling

01:06:20 The Importance of the Wealth Channel

01:07:41 Focus on Quality and Customer Experience

01:08:33 Cycling and Business Philosophy

01:09:26 The Importance of Investment Decisions

01:10:27 Final Thoughts on Investment Process

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