Will the Good Times Last? A Conversation with GPs on Valuations in Infrastructure

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Where are valuations headed for infrastructure investments? How are interest rates impacting opportunities in this sector? How are infra investors responding to demands for increased transparency in valuations?

At PEI’s Global Infrastructure Summit in Berlin in March, Mercatus had the opportunity to ask a panel of infrastructure investors these and more questions. Rishi Karir, VP of Sales for Mercatus, moderated the session “Defying Gravity? Outlook for Infrastructure Valuations,” which included Recep Kendircioglu, Global Head of Infra Equity at Manulife, Hamish Mackenzie, Head of Infrastructure at DWS, Timothy Keeling, Director of BCI, Kerron Lezama, Senior Director at CBRE Investment Management, and Maciej Tarusiuk, Senior Investment Director for Amber Infrastructure.

The conversation was lively and the room was full of GPs and LPs interested in understanding the nuances of infra valuations in today’s uncertain economic environment.

In general, the panelists agreed that the infrastructure asset class is holding up quite nicely amid this rocky economic climate – the asset class is generally resilient and defensive, often used as a hedge against inflation and other strategies. Valuations in infra, as in all private asset classes, tend to lag behind public valuations, which suffered in 2022 and so far this year. While certain infrastructure investments are more sensitive to rising interest rates, the asset class overall is doing just what it’s meant to do for investors – offer a long-term, diversifying exposure with stable cashflows.

McKinsey’s annual Global Private Markets Review for 2023 underscores these sentiments. The Infrastructure and Natural Resources asset classes combined hit a new fundraising high in 2022 at $158 billion globally, driven by five “megafunds” which raised over $10 billion each.

On valuations, Hamish Mackenzie of DWS noted that in infrastructure, there is a difference between valuation and the realization price – what the asset is valued at is often not the same as the price a buyer is willing to pay for it. His firm saw several infra businesses recently sell at a significant premium over their valuations.

The panelists all agreed they must have confidence in their investment valuations and that is hard to achieve when continuing to live in a world of disconnected spreadsheets and manual processes. Today’s investors are demanding more transparency and structure, after sometimes seeing inconsistencies in assumptions with comparables for certain assets. Several panelists also noted that modernizing their operations with technology can also help solve some of these challenges.

Other highlights of the conversation included:

  • Clean energy transition and digital infrastructure opportunities will likely continue to grow even if the economy slows.
  • While the sector still has strong tailwinds, risks include potentially overpaying for assets or taking on too much leverage offered by banks, making it difficult to refinance.

There is a dislocation in the carbon market – because it will take time, investment, and more innovation to remove carbon, there is an aversion to investing in it. If investors are willing to be invested for the long term, it could pay off.


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The material discussed is for informational purposes only. The views expressed in this material are the views of the author and are subject to change based on market and other conditions and factors, moreover, they do not necessarily represent the official views of Mercatus and/or State Street Corporation and its affiliates.

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