Fund managers can play a vital role in financing the development of critical infrastructure – from data centres to power stations. However, this will require some changes in terms of investment mandates, capital formation and infrastructure implementation processes if this role is to be properly realised.
This was the main takeaway from a session on infrastructure investment at the European Investment Summit in Paris, hosted by Societe Generale Securities Services.
It was also a subject that was addressed by keynote speaker, Hadley Peer Marshall, chief financial officer and managing partner, infrastructure at Brookfield Asset Management, the global asset manager with more than $1 trillion in assets under management.
According to Peer Marshall, transformative technologies – from the steam engine to the internet – have reshaped economies and what constitutes critical infrastructure. “When I started, infrastructure was ports and railways and now it’s data centres and lithium batteries,” she said.
“When these assets first emerged, they weren’t even considered investable—but the market has evolved. Infrastructure has been viewed as boring but it’s intertwined with the very backbone of the global economy.”
More specifically, AI is the technology likely to usher in a new wave of innovation that could exceed previous industrial revolutions. The use of agentic and generative AI is not just limited to processing information, it is also increasingly used in the physical world, from logistics to healthcare to manufacturing.
But while the definition of what constitutes an ‘infrastructure’ asset is changing, asset managers are sticking to their criteria.
Infrastructure investment philosophy:
Brookfield has based its infrastructure investment philosophy on the three D’s – decarbonisation, digitisation and deglobalisation. A philosophy that has stood for more than 20 years now. “We coined this term in 2001. Now deglobalisation means tariffs, digitisation is about AI and decarbonisation was originally about sustainability and ESG but is now simply about power and the energy transition,” said Peer Marshall.
For Nathalie Kosciusko-Morizet, senior partner at French private equity firm Antin Infrastructure Partners, the definition of an infrastructure asset is not sector-dependent but risk profile-dependent. “When we invest in an infrastructure asset, there are five criteria – essential service, barriers to entry, stable cash flows, downside protection and inflation-linkage. We are not changing our criteria but the world is changing, we have to take that into account,” said Kosciusko-Morizet.
For Julien Touati, chief executive and founder of Reed Management, an asset manager focused on essential infrastructure, it is about contracts rather than concrete. “You need to put frameworks in place to make them infrastructure – the long-term contracts and the ability to operate at scale.”
Consequently, the ‘infrastructure’ label can be applied to assets as diverse as smart water meters (capex-intensive with long contracts) or healthcare platforms (also capex-intensive and with regulated pricing).
Things evolve, said Gwenola Chambon, chief executive and founding partner at Vauban Infrastructure Partners. “The last 15 years has seen more investment in digital and AI, so the way we operate as a society has changed and so does infrastructure.”
Standardised implementation:
An additional challenge for infrastructure investors is that they are essentially long-dated assets in a rapidly changing world with inflation and ever shorter time frames. And while not much can be done about inflation, efforts must be made to make implementation easier to standardise. “This industry is a desert in that regard,” said Julien Touati, CEO and founder of Reed Management.
For the data centre sector, there are two critical issues – the availability of power and of capital. Additionally, there is still come uncertainty from banks and investors around contracts. Consequently, the funds industry is only beginning to access the capital needed for debt financing and capital formation will be key in the future.
And for those firms looking to invest in data centres, it will be important to find gaps in the market.
“When you’re a newcomer, you have to find a niche,” said Touati. For example, while the data centre market may be led by the US currently, there is a need to provide ones that are better suited to the European market with a greater focus on both energy conservation and low latency. “We are happy to put ourselves in that niche.”
Another issue that was debated by the panel was the move to allow retail investors to invest in private markets. “Retail investors have higher liquidity needs than is currently provided by infrastructure funds. It will be a big growth area over the next five years but it will rely on the institutional market,” said Peer Marshall.
The next target, said Peer Marshall, is all the 401Ks (the employer-sponsored, defined contribution pensions in the US). “It is a massive opportunity but you have to design the products to fit. As of now, you cannot put infrastructure assets in there, so it will take time and we have to do it right as an industry.”
