Infrastructure dealmakers eye $100 trillion in global assets

Blackstone infrastructure co-head Trent Vichie and Chris Leslie, CEO of Macquarie Infrastructure Partners, say only a fraction of what's needed for infrastructure investment worlwide has been raised by private funds. Meanwhile CVC’s infrastructure chief, Stephen Vineburg, also speaking at PEI’s Infrastructure Forum in New York, said infrastructure investing has reached a third stage in development.

The worldwide capital stock of infrastructure “is somewhere in the order of $100 trillion”, Trent Vichie, senior managing director at The Blackstone Group and co-head of its infrastructure arm, told delegates yesterday at PEI’s Infrastructure Investor Forum in New York.

He said private fundraisings for infrastructure thus far represent “only a tiny, tiny fraction” of this amount, so an imbalance in the supply of private capital and asset availability in the sector is a misperception.

“What we have seen that's made people say there's more money than deals has been a lot of focus on a very limited number of auctions,” Vichie said. “Right now, I think there is the opposite problem.”

Chris Leslie

Fellow panelist Chris Leslie, chief executive officer of Macquarie Infrastructure Partners in New York, concurred with Vichie and estimated that some $100 billion has been raised for infrastructure investment worldwide in recent years – not enough to meet the needs of all the potential deals in the sector.

Although infrastructure investing is still relatively young, Stephen Vineburg, chief executive officer of infrastructure investment at CVC Capital Partners, said the asset class has already witnessed three distinct stages of investment.

In the first stage, investors could buy any infrastructure asset and expect decent returns. Buying a hospital, for example, and holding it would be all an investor had to do to reap rewards.

In the second stage, investors could still get good returns by buying assets and leveraging them up, which led to a “gold rush” to buy infrastructure assets and lend against them, he said.


“Well, guess what? Those two stages are over, and from here on, in order to make decent returns on infrastructure, you've got to make gains along the way,” Vineburg said.

Firms must add value to the investment over the life of the holding period, such as scheduling and managing capex effectively to minimise delays and cost over-runs and seeking marginal operational improvements whenever possible, he said. Giving government authorities a visible point of contact in a consortium so that they know with whom to engage throughout the life of the concession is also important, Vineburg added.

If executed correctly, the sum of such value-add strategies can add “a couple hundred basis point” to an investment without compromising the risk profile of the asset, he said.

More stories related to PEI’s Infrastructure Forum in New York, which continues through today, can be found on newly launched sister website InfrastructureInvestor.