Ah the roar of the crowd! It’s not that Infrastructure Investor conferences tended to be like gladiatorial matches at the Colosseum. But if you’ve been to our flagship Global Summit in Berlin, you know we’re capable of assembling a world-beating infrastructure gathering.
During our debut virtual infrastructure event – the Global Offsite, held last week – the in-person interaction between crowd and panellists was easily one of the things we missed the most. Importantly, though, what we had missed the most – connecting and debating with the industry at one of our events – was an itch we thoroughly managed to scratch.
So, if you weren’t roaming the virtual halls of the Global Offsite, networking and discussing with over 200 GPs and LPs, among others, what did you miss? A lot, of course. To help tidy you over, here are three takeaways:
The industry is behind a green recovery
“What’s interesting is that this time around, renewables is part of the recovery: a job creation strategy,” Pooja Goyal, a partner at The Carlyle Group, told Global Offsite attendees.
That’s encouraging given the ongoing climate emergency and the need to stimulate growth post covid-19. What’s equally encouraging, though, is how strongly renewables have been performing during this crisis.
“Our long-term contracted assets are performing quite well. Electricity is very much an essential service at a time like this. And so, whether it’s a utility or a corporate off-taker, we’re seeing a lot of resiliency in those contracts,” said BlackRock’s global head of renewable power, David Giordano.
Giordano acknowledged that a 15 percent drop in global electricity demand poses some challenges for assets that are more exposed to merchant risk, but stressed “the fundamentals of the assets, the performance of the assets and the performance of the contracts has been quite strong”.
Digital is booming, but watch your contracts
At this point, it’s self-evident that digital infrastructure is one of the strongest beneficiaries of the changes being rammed through by the global pandemic. So it won’t come as a surprise to find participants were bullish about the opportunity.
“I expect governments to look for private capital” to support the build-out of greenfield projects,” said Canan Anli, head of business development ICT at Mubadala Investment Company. “The investment opportunity is so huge, as well as the capital need, it doesn’t make sense for governments to do this alone.”
Still, would-be prospectors will do well to read the fine print of the contracts they sign as they join this particular gold rush. Front of mind should be how ‘sticky’ customers are – as BlackRock’s Jérôme Leyvigne put it, “you want to have sticky customers [even if] assets may not necessarily be bad” – and contract duration. Also long-term contracts, as EQT’s Jan Vesely pointed out, have the best chance of protecting investors against the sector’s main concern: technology risk.
A balanced portfolio really is your best friend in a crisis
‘Diversification’ is such a staple of portfolio construction theory – and repeated with mantra-like fervour everywhere – that you’d be forgiven if you’d grown cynical towards its efficacy. Guess what, though? If you apply it, you will reap the benefits – especially in a crisis.
Simon Davy, head of private markets at the UK’s Local Pensions Partnership, made that clear in his keynote interview at the conference.
“I am confident that infrastructure will deliver. But for me, the primary consideration is portfolio construction. If you’ve got a balanced portfolio with a mixture of risks then, on the whole, I think we’re going to see infrastructure do what we would expect it to do for investors.
“If you have been heavily weighted towards more growth-orientated or transport-related assets – and there are many managers out there that have been very successful on that basis – then I think you will have suffered and there will probably be a greater hit to the valuations and the income coming off those assets in the coming years. From LPP’s perspective, a balanced portfolio construction has worked well for us.”
Write to the author at firstname.lastname@example.org. If you are interested in watching the Global Offsite sessions on demand, let us know. Also, don’t miss our upcoming online-only Seoul and Tokyo summits, on 8 and 10-11 September, respectively.