← Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
Alt Goes Mainstream: The Latest on Alternative Investments, WealthTech, & Private Markets
Stonepeak Credit's Ryan Roberge - building an infrastructure credit strategy
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As the private credit industry, especially core direct lending, has exploded, the opportunities to deploy that capital have been in large software, large healthcare deals, and so the transactions that we're financing just don't make up a large exposure for that industry. And so I think for folks that want to have further diversification in their portfolio and have part of it backed by hard assets that operate with different macro trends, it's a really interesting way to play that space.
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Everybody gets a piece we're going mainstream
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Everybody's going to eat we're going mainstream.
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All my family see see you on mainstream we're going mainstream. From Wall street to Melrose Avenue, we're going mainstream. Venture capitalists to athletes to creators to the person who has collected trading cards, we're going mainstream.
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In a collision of culture and finance, we're going mainstream.
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This episode of AltGoes Mainstream is brought to you by Altimus, the full service fund administrator and transfer agent powering asset managers in private and public markets. As alts go mainstream, you need real expertise to handle complex fund structures, connect with key distribution partners, and handle sophisticated compliance reporting and transparency demands. That's Altimus High Tech High Touch Solutions for over 450 clients and 2,500 funds with over 775 billion in assets under administration. Backed by an expert team of over 1200 employees, they place client service at the core of their business, helping you navigate complexity during your fund structuring or launch, and then supporting you through every stage of growth. Whether you're already in the market or thinking about entering private wealth, you can trust their team's deep expertise in retail alternatives to help you reach your goals. Learn more at ultimusfundsolutions.com or email infoultimusfundsolutions.com welcome back to the Yelk Goes Mainstream Podcast. Today's conversation unpacks an emerging category within infrastructure investing that has a compelling set of market forces and megatrend tailwinds. We sat down in Stone Peak's New York office with Stone Peak Credit Partner and Senior Managing Director Ryan Roberge. Ryan brings a diverse set of experiences to bear that help him build an infrastructure credit fund at Stone Peak. He previously covered the energy and infrastructure sectors for King Street, a New York based hedge fund focused on distressed special situations and event driven credit investing. Prior to King Street, Ryan worked in the Energy Group at TPG Capital, a large global alternative asset manager. Ryan started his career in Credit Suisse's energy investment banking group. He received a Bachelor of Science in Finance from Louisiana State University. Ryan and I had a fascinating conversation about why the time is now for infrastructure credit. We covered how Ryan's background across energy investment, banking, energy, private equity and distressed and special situations Energy and infrastructure investing all help when investing in infrastructure credit. Why infrastructure credit is a specialized capital intensive strategy how to underwrite data center risk Contrarian AI Insights the biggest risks in infrastructure credit investing how and why infrastructure credit is different from other areas of private credit and direct lending and how a specialist investment platform can help inform where to invest in infrastructure credit. Thanks Ryan for coming on the podcast to share your expertise, wisdom and passion for infrastructure and cradle collision of culture and finance. We're going mainstream Ryan. Welcome to the Elkos Mainstream Podcast.
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Thanks so much for having me. I appreciate it.
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A pleasure to have you. I think we have such an interesting conversation on tap here. Your background is fascinating. You've done a bunch of different things to get you to the perch of infrastructure credit. Infrastructure credit, emerging asset class itself and there's a lot to talk about there as it relates to just the growth in the infrastructure market, how credit fits into that, where it fits into a portfolio. So we'd love to start first with your background. You have really interesting vantage point within infrastructure credit given your background as a banker, a private equity investor, a research analyst focused on the infrastructure and energy space. Would love for you to talk about how all of those different pieces of the puzzle have helped you get to where you are today and how you think about things.
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Because of that, I started my career at Credit Suisse in Houston, really learning the energy industry at a fascinating time. Post GFC was 09 I hit the desk. I'm young, I'm green, I'm thrown into what's going on in the shale boom. It's a different type of underwriting and analytical work that might have been done historically in the energy space. Combined technological advantages that are going on driving a really interesting renaissance in the energy industry. And so I was kind of at forefront of pitching companies really interesting financings and M and A opportunities, but really developed a deep skill set in energy. Specifically it was upstream, it was midstream, it was services. And that's what took me to TPG out in San Francisco. They were hiring sector focused people to work on the buyout fund out there. So I joined a great team out there and had a wonderful experience. But it was my first foray into actually investing, owning the risk after the deal actually gets done and understanding how to think about driving returns, driving efficiencies out of portfolio companies, but still really just covering midstream upstream, downstream. But my first foray into understanding sort of the buy side risk element of it. And then most of my classmates wanted to go to business school and wanted to pursue tech venture stuff. I still wanted to work in energy and infrastructure, didn't take the GMAT and go to business school. And so I actually ended up with a really unique opportunity to come to King street in New York. King street is one of the flagship distressed funds in the industry. Been around since the mid-90s. I got an incredible opportunity to work closely with Fran, Brian Paul Goldschmidt, who recently launched a fund as well and really learn credit from an interest, interesting vantage point in the market through deep value analysis, distress, learn the bankruptcy process, learn how creditors think about framing upside, downside, risk, really underwriting for capital preservation purposes. But again focusing on energy. They needed somebody who was an energy expert. And I said, I haven't done credit a ton in my career, I've done some good investing. And so they taught me a ton about credit and that helped launch me into infrastructure credit.
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It's interesting to go from equity to credit. What do you think you took from your background as a private equity investor that gave you a certain perspective on being a credit investor?
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I think really just thinking about long term value. So understanding the energy industry, which is what I was particularly covering at that point, it is a volatile industry by nature. It ebbs and flows with capital cycles, commodity cycles, and then with the shale revolution for the first time, really dramatic technological cycles that increase the efficiency, the speed, the ability to grow production and all the necessary investments. Investment along the way in infrastructure and other things. And so looking at things from a long term value perspective as opposed to from a banker side, what I can sell into the market, what's the market looking at today, how can I get things done? It was really how's this investment going to perform over the long term? What do we know, what do we not know? But also from the equity context, thinking about the upside and what could really drive really great investing. But I think TPG as a culture was really formidable in focusing in on the downside. And I really learned there that like look, the upside takes care of itself a lot of times. Times. But the analysis that we do really needs to be focused on the downside. It needs to focus on prudent use of leverage, underwriting cases that are really stressed, understanding where the pinch points are. And that forms the foundation for 99% of the credit investing. The upside case belongs to somebody else. It's great if it happens it covers our loan even more. But we're obsessed with protecting capital on the downside. And so taking what was business level expertise? I think when I got to King Street I didn't appreciate how valuable having a deep understanding of the business was to then expressing those views. In the liquid credit markets. Given the wide array of different participants that invest in credit, I think that's
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a great segue to infrastructure credit. So a slightly newer asset class infrastructure equity has shades of private equity. Infrastructure credit has shades of private credit. What skill set do you think is most beneficial to have as it relates to being an infrastructure credit investor?
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Our three main sectors that we cover here, most of the industry covers frankly energy and energy transition, digital infrastructure and then transportation logistics. These are all very specific sectors that require unique knowledge on underwriting these businesses down to the asset level. And so in energy, power is not a skill set that you pick up overnight. Understanding how to think about the complexities of the power markets, how different generation aspects may dispatch, how they get natural gas sourcing, if there's issues in terms of sourcing, that basis differentials, There's a lot of things that move the needle in terms of how these assets generate cash. So having asset level expertise is really critical to understanding how to underwrite these businesses because you have to pick through, I think even more than other sectors that are more well understood by generalists everywhere, the understanding what the true downside is in these businesses requires expertise in these sectors. I think the second one I'd say is that this is a capital intensive industry and not all industries share that same mentality. And so our business is a return on capital based business. It is deploying capital into hard assets and then those hard assets are generating cash flows on the back end. Whether it's through lease payments, contract payments, or maybe merchant power. Power into a grid at a given price, whatever it may be. So having the ability to underwrite that return on capital and think about unit economics, duration of the assets, maintenance, capex required, the unlevered yield you might get out of a project. That's not a skill set that's taught across every single different sector. In other businesses it's more about revenue growth, it's more about retail margin, it's more about other things. So finding people that have underwritten and thought about the world from a lending perspective, it's we're lending X amount of dollars, equity's putting in Y amount of dollars to support a platform or an asset. Our downside is comfortable owning this asset in a variety of situations through the cost basis of our debt and how we get comfortable on that. It's very much an equity like underwrite. We may not need to do the same level of underwriting that an equity sponsor does if we're 50% of the dollars in a project, as an example. But we have to have a view that in the downside if we own this asset, we're always going to get our capital back. And to develop that view, you have to understand how to think like an asset owner and an operator.
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I think that brings us to an interesting perspective on infrastructure as an asset class. I think a lot of people at a high level probably know like some of megatrends around digitalization, decarbonization, power and energy being really important. What are some of the less obvious things that people either investing in the infrastructure space or looking at it as allocators should think about as they really try to understand infrastructure and what makes a great infrastructure investor?
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I think some of the trends that drive the macro side are somewhat obvious as a massive infrastructure funding gap in this country, it's only getting bigger with the proliferation of AI, the data center capital need that is happening right now and then the power need associated with that and the infrastructure being built to service that. I think what's really interesting is when we look at the large direct lending market and we should pick apart the different parts of private credit and how we think about that market, what we do, the types of companies that we're lending to are not present in a lot of the big direct lending portfolios. And it's not because these aren't attractive loans that could compete for that type of capital. I think it's because the specificity and the specialization needed to attractively originate underwrite this type of risk isn't necessarily present across the board in those types types of portfolios. So we really think that the asset class itself is very unique and it requires a certain set of skills and the capital that's needed to service it is going to grow.
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I'd love for you to unpack that last statement a bit more. The ability to understand the asset in a way or at a level that other credit investors may not be able to understand. What do you mean by that and what do you look for that a regular way credit investor may not look at.
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There's groups across Wall street that cover power and cover energy. So there's folks that understand these sectors in a lot of places. But I think direct lending is really about the LBO flywheel financing. So it's a sponsor financing business heavily Targeted in healthcare software, really asset light businesses because a lot of times these loans are based on unlevered free cash flow that can service the debt. It's what supports high leverage multiples. There's great private credit investors out there that are looking for stability in cash flows to support high leverage levels where they can earn excess spread over the term loan B market or the bank market. Infrastructure is a bit different. A lot of times we'll lend against assets that are still under construction. The company might be consuming capital. They may have existing operating assets that they're expanding, doubling the size of the asset base. So for two or three years that business may be burning cash so it doesn't check the box of ebitda to unlevered free cash flow providing this really interesting yield profile. What you're underwriting instead is what's the value of this capital going into the ground? And that's a complicated question. Management will tell you what they think it's worth, but ultimately it's about what are the existing contracts, what are the new contracts in the pipeline that may look like? What happens if that pipeline doesn't materialize? What do we believe on our end? The underlying customers may pay for this asset in a different set of assumptions. And so it's a totally different analysis on the value of the hard asset that underpins our collateral and our security.
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There's different ways that companies can access capital in the infrastructure space. I'd love for you to talk about some of the differences between how they might tap into the bank market, how they might tap into regular private credit, why they might choose an infrastructure credit manager. How do you think about that and how are companies in this space thinking about who they'd work with?
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Infrastructure companies in general have great access to capital. These are long term, durable, sustainable assets, contracted cash flows, all the things that infrastructure investors really love about the asset class in general. I think it really depends on the individual needs of a borrower and where they are in what I like to call the maturation phase of the asset and the platform in general. So you have everything from renewable asset development, which is teams spending dollars putting the seeds in place for large infrastructure renewable energy projects. But they're moving dirt around, they're getting permitting, they're putting deposits down on equipment, et cetera. That's an equity like story. But you can also borrow in early phases of that. Then as you develop certain asset bases and the proportion of the platform's value, if you want to think about it, becomes more and more associated with the operating part of the business, existing assets and operation, your access to larger institutional capital, lower cost of capital starts to open up and you can ride that phase all the way up to a large grade utility or a large investment grade pipeline company. Different stages of that cycle have different needs. From a capital access perspective, the market on the right hand side is very well established. That's the bond market, that's the IG bond market, the term loan B market. There really isn't a role for credit very early on a lot of phases, at least not how we think about the right risk. Adjusted returns is not a credit risk early. So it's really a spectrum of in the middle. What are you helping somebody finance? Are you financing the growth capital spend on expanding a platform that may have limited cash flow today, but very good prospects on generating that cash flow over time? Are you helping finance a platform that's going to be acquisitive, starting with a smaller asset base and grow through acquisitions and scale with the goal to sell it to a larger strategic or a larger infrastructure manager on the back end? And so there are different needs associated with that and different risk tolerance associated with asset owners.
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You mentioned something earlier about how an infrastructure credit firm might end up working with a company. Maybe it happens a little bit earlier in the cycle than a private credit manager may work with a mature software business or healthcare business. How do you think the maturation of the private credit market and how that's interacted with private equity mirrors how the infrastructure market structure, infrastructure equity and infrastructure credit complementing infrastructure equity might evolve based on what we've seen in private equity.
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Private equity, right. I think there's a stark difference. When you get large scale capital intensive infrastructure businesses, there really isn't a role for 500 over 600 over direct lending style capital. Those businesses by definition are typically much safer. They have much better duration, much better underlying collateral asset value. And so a very large 3, 4, 5 billion dollars s plus 600 term loan to a software business. There's not really a corollary in the infrastructure space. Really what our cost of capital, which is in that high yield type of risk spectrum is doing is we're helping finance the growth of assets and platforms as they achie leave that more mature part of the cycle. As private credit has raised a significant amount of dollars both from institutional and wealth channels and their check sizes have gone up dramatically, there's still a large market for them to finance very large tech deals, very large software deals, because the inherent risk, even though those companies have very large valuations and have massive scale. The inherent risk in those businesses is greater than an equal valued infrastructure asset that might be 3, 4, 5, $6 billion in size. And so I like to think about it as our Stone Peak equity colleagues. They are taking S600 First Lien Capital for their deals today. When they're deploying multiple billions of dollars of checks, they have access to the IG bond market, the ABS market, the term loan B market. Places where you're finding hundreds of basis points of additional spread compression versus a Tom Bravo deal, for example, that might be very, very large and also borrow from the private credit universe. Now the private credit lenders, even in that large universe still deliver speed, certainty, flexibility, all the things somebody may need, but the competition for that capital. A lot of times those businesses are very large, but they're still investment grade. As you think about true credit risk,
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why would a company or an infrastructure asset decide to go with infrastructure credit as its form of financing rather than infrastructure equity?
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I think they go with both, quite frankly. Our most infrastructure equity funds today, a lot of the ones that people are familiar with are very, very large in size. And so they're putting dollars out the door, usually not taking infrastructure credit. Sometimes in the holdco there's opportunities for an asset where you have very low risk opco down that you can be a piece of mezz capital to help an infrasponsor get a deal done. And there's lots of attractive opportunities to do that as well. Our strategy is more primarily focused on first lien secured against the hard asset collateral. And so for us to achieve the returns we're looking for, we're typically looking at the more middle market, sometimes even the lower middle market part of businesses. And these are platforms that are doing anywhere from 25 to 100 of EBITDA. These are businesses that have a couple hundred million bucks in from a sponsor. And we're helping provide non dilutive structured capital in the form of credit to help them scale whatever business they're doing. A lot of times we're working with folks in the financial sponsor side that see the opportunity to sell into strength in the larger infrastructure world if they can achieve that type of scale contract profile, historical financial proof that the business is resilient. We know what the map looks like to get to where they want to get to and what pieces are in place and what to look for on the larger side. So it really helps us identify interesting opportunities in that earlier phase.
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You talk about the type of deal structure that you do first lien secured against the Hard asset. How should people think about infrastructure credit as to where it fits relative to the broader credit universe or even maybe if they have infrastructure exposure? Where are people bucketing infrastructure credit?
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Infrastructure credit's a wide lens. There's obviously investment grade pieces and non investment grade pieces. So there's a lot of opportunities depending on the client for people to access the relative risk profile that they're looking for in non investment grade, which is where we play today. I think it's an incredibly powerful complement to a portfolio of core direct lending. The core direct lending universe is much larger. It covers way more sectors. It's always going to, I'll call the cornerstone of an alt allocation to a private credit portfolio. And there are phenomenal managers in that space that have built scale businesses. I think in talking to a lot of investors on the institutional and on the high net worth side, they've woken up today and they're happy with the allocations to that space. But they're seeing certain sectors fall out of favor. They're seeing a lot of correlation between end exposure both to certain sponsors, but certainly certain sectors like healthcare and software and more asset light sectors. And they're thinking how can I get additional diversification in my portfolio while achieving, achieving very similar or maybe even better risk adjusted returns. And that's what asset specialist firms can offer and infrastructure as an asset class offers that. Our portfolios are full of deals that comprise 0 to maybe 5 to 10% of large direct lending portfolios. Investors aren't getting access to the types of transactions that we're doing today. And so we offer a really interesting complement to an overall portfolio structure.
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B
Why are infrastructure credit investments able at times to generate higher returns or yields than more traditional direct lending?
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We view it as a very similar return profile. I would flip the answer a little bit is not higher. People shouldn't think of infrastructure credit as alpha relative to core direct lending. I think of it as a more stable return profile. And so in the heyday of direct lending and some parts after Covid in 2022 when good deals of first lien spreads were 650, 750 over really interesting attract, you had interest rates at 4 or 5% on a risk free basis. So these deals were generating low teens, unlevered returns in private credit. People are like wow, first lien low teens. This is a great asset class. And then a lot of capital floods in competition. Lbos volumes slow down, a lot of competitive tension for deals. Spreads have compressed dramatically. Our spreads never got to 750 for the deals we were looking at because there's always a robust bank market looking to lend against good hard asset companies. And equally we're not seeing the same level of spread compression in our deals today. And so our market is a little bit more stable in terms of the risk adjusted returns. We believe that the asset classes that we cover in general backed by hard asset security for lenders, provides better risk adjusted returns on an equal basis. And we see it as our job as how can we find and build portfolios that offer 450, 550, 600 deals blending around a 500 spread where we're not asking an investor to take a dollar away from core direct lending and put it into something that generates lower yields. I think we want to generate very similar yield profiles in what we believe is a better risk adjusted asset class and certainly offers further diversification from what investors are investing in today in core direct lend lending.
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I want to touch on the diversification point. How, how do investors think about the diversification aspect of where infrastructure fits into a portfolio and also how should they think about exposure to both infrastructure equity and infrastructure credit?
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There's a lot of interesting pieces there and I think it's about investor individual risk tolerance. But I'll take the private credit versus infrastructure credit question first. You can look at what a lot of the public BDC portfolios, either non traded or even publicly traded have in their portfolios and we've mapped this and a lot of them have 2, 3% of their portfolios in what we consider to be infrastructure deals. And so there isn't a product touching certainly the wealth channel market today that is offering folks exposure to overweighting towards data centers, fiber to the home pipelines, power transactions, aircraft financing, ports, toll roads, specialty trucking. Like all the types of transactions that we're doing, the bulk of our portfolio is financing, financing hard assets, but doing it under sponsor backed platforms for the most part where there's an operating element to the business. We're not ABL lenders where we're just lending against aircraft at super tight rates. We'll lend against aircraft in structured situations, but it's usually to a lessor who has a living breathing business. And so you have to underwrite contract duration, releasing risk if there is any part of value of the plane, if it's a midlife aircraft. So after the lease runs out, what do you do with it? You can take the airframe apart, take the engines off, off. We have specialty expertise in house that knows how to think about that and fly the plane forward. And what type of Value is going to be left. And so there's specialization associated with what we're doing, but we just don't see it as being a core part. As the private credit industry, especially core direct lending, has exploded, the opportunities to deploy that capital have been in large software, large healthcare deals. And so the transactions that we're financing just don't make up a large exposure for that industry. And so I think, I think for folks that want to have further diversification in their portfolio and have part of it backed by hard assets that operate with different macro trends, it's a really interesting way to play that space.
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I want to touch on the point about hard assets because I think people are seeing what's been going on in software markets, what's been going on with AI, and the impact that AI will have on SaaS, but also knowledge work more broadly. What do you think it means to have exposure to hard assets today, particularly where we are in the both the current economic and macro environment? And then also with everything that's happening with innovation in AI and tech, let's
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just focus on data centers because they're all interrelated and they're correlated. So I think first and foremost, anybody that tells you that they're backing data centers as a hard asset today, but they're not taking technology risk isn't being honest. Ultimately you are taking some technology risk. Now you may have an underlying contract with a counterparty. That contract is take or pay pay. So on the front end of the transaction you're taking credit counterparty risk, you're underwriting. Will a Microsoft, will an Amazon pay its bills? That's probably a pretty good bet. Will a tier two counterparty, a core weave, or somebody else who may not have the investment grade shine of a hyperscaler pay its bills? Do they need this? What happens if they don't? That's more pure credit analysis work that everybody thinks about. Infrastructure cycles are much, much slower than the technology market. And I think we have to be realistic about that. And so, so the nvidias of the world and the core weaves of the world are going to innovate at much quicker cycles than the data center developers of the world are going to put the right power and the right facilities in place to be able to facilitate that. And so we always challenge ourselves to think about what happens in a different environment, whether it's releasing risk, bankruptcy, risk of credit counterparties, to really think about the terminal value of the assets. And so in data centers as an example, we really want to focus on markets where where the data centers are somewhat strategically located, they're close to the eyeballs. They're constructed and configured in a way where they are not solely built to be the lowest cost possible machine for an AI training workload that's very high, dense, racks a lot of power, not as much space, don't need some of the bells and whistles that a general colocation facility may need. That facility in our opinion, if it's in the middle of nowhere where there's low cost power is exposed to risk, risk on the releasing side or the terminal value side, is this something that needs to be around for 50 years plus? We would rather focus on. You may have one of those AI training workloads in there today, but a facility that can be reconfigured with minimal capex if something happened where you could sell it at a discount to the market if you really wanted a tenant to come into a Microsoft for general cloud purposes. And so I think you have to understand how the data center operators are thinking. We benefit from being integrated within Stone Peak. We have access to our portfolio company CEOs, we have access to our deal teams in terms of the expertise that they're underwriting on. And so it really helps us develop a view on how to think about that and pursue certain industry trends alongside very heavily researched theses that we're developing in house.
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Do you think many investors are properly underwriting and assessing the risks with something like data centers and the counterparties that they're underwriting? Or are those some sort of hidden risks that people might not be appreciating as much as they should? Particularly if, if things do change, macro environment changes, maybe there's some technology risk in there too. What's your take on how the broader market is thinking about this in general?
- [27:28]
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I think it really depends if you're the equity or the credit and it highly depends on the structure of the deal. The bank market has really gone headlong into financing hyperscale backed data center development. And so the pitch from a bank is if you show up with a bulletproof contract from Mexico Meta and you're building a data center and really all I have to assume is that you know what you're doing to build the data center, what could you screw up that could cause that contract to be terminated? If I believe you're not going to do that and this thing's bulletproof and you have the access to the power, I don't really care where it's located. If I get comfortable that medic can come in and pay the bills and I structure a debt instrument that bridges you to that construction. And I know I can get swept down by the contracted cash flows. I don't necessarily care as much about the specificity, the assets, the technical specifications and all that, that stuff. There is a lot of data center development going on that doesn't fit that mold where you have to take those considerations into place. And so I think in a chase for yield by private credit or by other investors on the credit side specifically, people are trying and doing the diligence to try to get comfortable around how to assess those risks. What's the right loan to cost amount? If you have a hyperscale bulletproof data center, you could probably get 80 to 90% of the dollars from a bank at a two handle spread. If you're doing something that's a little bit more speculative in nature, has a contract counterparty that has more technology risk like one of these NEO clouds or GPU based businesses, you make it 65 or 75% loan to cost. And so there's things that you can pull on from a creditor perspective to give you more additional comfort and require more additional support from the counterparty in order to get the deal done.
- [29:00]
B
The other thing that comes to mind as I'm listening to you talk about all of this is there's so many different interconnected pieces within the value chain as it relates to any area of infrastructure. But let's just take data centers as an example. You need power and energy to power the data center. How do you think about investing across the value chain of a specific infrastructure, strategy or sector and making sure you're financing each piece of that value chain given that it interconnected.
- [29:29]
A
I think we're seeing a lot of opportunities to do things like equipment based financing on turbines and other core equipment that goes into the data center. There are land aggregation businesses out there that are trying to deliver powered land as a service. So we'll go out and we'll source the land, we'll buy it, we'll work with the utility to make sure there's water and power and everything set up here, highway access, make sure that there's fiber connectivity nearby, or convince folks to come in and we'll deliver that as a solution to either a hyperscale customer to build their own data center, or a large data center developer to build their own data center. And that's a very interesting model where folks can deliver that as a service. They can borrow capital from folks like us and put in some equity to be able to sign a Long term lease on just the land and the delivered utility. So there are businesses that are doing that as well. Look, we're open for business across the value chain, but I think it all comes down to underwriting. The specific nature of the projects like turbine financing is a topic a lot of people talk about. I was recently in Houston and there's a lot less talk about midstream energy because the space is consolidated a ton. And there's a lot more talk about recips and distributed power and how everybody wants to get into that business by providing quick access to mobile power power to go into these places where the grid may not be available or the utility might be strained and somebody might be waiting on a three year waiting list to get more permanent generation power built in there. Those businesses are great businesses. Historically they provided power to the oil and gas industry for frac fleets and other pipeline operations. In the middle of West Texas where there's not great grid power. Today they're seeing this massive resurgence in the ability to access the data center market. But you have to think about is that a near term boost as a band aid to solve a bridge or is that something where these assets could actually have a long term stability in that market? Because every single cycle in any equipment based market will have shortage of supply, a massive build out and some period of oversupply. And so I think we're highly focused on yes, those are interesting opportunities today. But what happens five years from now if something slows down in the data center market and there's an oversupply, pricing gets compressed, utilization comes down, it really impacts your recovery value?
- [31:32]
B
I think that's a really interesting topic to go a layer deeper on. Particularly given that infrastructure assets are generally long duration assets. And investors, whether it's the actual fund or those LPs who are investing into infrastructure, they have to take a long duration view on the asset, the space, et cetera. How do you think about balancing taking a long term view on a specific type of asset, asset sector or theme, but also balance it with some of the things that you just mentioned around. There's a bit of a cycle where there's a lot of capital that comes in, they're then become an oversupply and then you have to deal with the after effects of that.
- [32:14]
A
Most of our loans are four to seven years for the most part. We are taking views on sort of maybe call it a four year plus four year basis where what's the next buyer going to value this asset at? Where's the next borrower or lender going to come in to refinance us, how is that all going to work? And the underlying assets are usually 20 plus year assets. And so we have very long duration assets, a sort of half of that in terms of our investment horizon cycle and our loans only outstanding for a quarter of that useful life on the asset. But I think we always come back to underwriting the asset first. Ultimately we're very equipped to underwrite credit, capital structure, creativity, structuring around it. But what underpins the downside protection of our investments is the asset. And so thinking about the asset in terms of a long term view, you and so I'll give you an example. Most assets get built that are new, have a forecast from management that has very little maintenance capex. But we know by doing this infrastructure investing multiple decades, there are always reinvestment cycles. Distributed power is a great example. You buy a brand new recip today, you might be able to run it on a very, very good cash flow margin for five years. But between five and 10 years you have to almost rebuild the entire thing, especially if you're running it on a full blown basis. For a data center providing daily power, you got to take that engine block back, take it all apart, take all the blades apart, put it back together together. It's a massive capital cycle. And so we think about the value of that asset as taking that depreciation as a proxy for maintenance capital or taking what we know is that type of recycled capital and putting it evenly over the life of the asset because that's the true underlying economic value of the asset itself. And so looking at things like EBIT comparing that not just an EBITDA number that is heavily adjusted and so thinking about that long duration part of the asset, but then also being pragmatic and saying okay, we have a view, the cash flows look interesting even adjusting for this and burdening the case with more maintenance capex. But we're taking the next four year view. And next four years the market looks tight, pricing looks really interesting. And so you run that case and it always looks good. And so then you start stressing it and trying to figure out what you need to believe and making sure that in the worst case scenario you're not impairing capital.
- [34:14]
B
There's another trend related to that which is the growth of the infrastructure asset class. It's a few trillion dollars at this point. Majority of that has been infrastructure equity.
- [34:24]
A
Yeah.
- [34:24]
B
How do you think about the increasing amount of capital coming in to infrastructure as an asset class? What does that mean for you? As a credit investor and how do you think about where the opportunities are, but also where there might be overbuild or oversupply?
- [34:43]
A
As a credit investor, I would say that that the funding gap in infrastructure, as I see from a macro perspective, it still needs more and more capital from the private sector. And so it's great for us that there are a lot of private equity funds raising capital, generalist firms that have vertical teams that target infrastructure sectors and they're raising capital to pursue those businesses. And so the more equity capital on the private side of the market out there, investing in these businesses, growing in these businesses, is great for our business because these are the borrowers that we leverage. So I do think that there's a great tailwind for us. I worry when I see capital get raised to chase certain themes that don't necessarily have true underlying economic fundamentals. And so what do I mean by that? A lot of the capital raised in sort of 2021, 2022 focused on ESG, chasing themes that really required in many cases, nascent technologies that had unproven business models, a lot of subsidies and government programs to make the business models work, all under the guise of decarbonization and things like that, which is a theme that we believe heavily in. But I think we equally believe in making sure that the underlying business, no matter what it is, has economic fundamentals that make sense and it's not solely reliant on stroke of the penis, regulatory risk, et cetera. But I get worried when you see capital raised to pursue one specific theme and then going into those themes and seeing deals. I like to tell folks we don't have a single renewables deal in our original fund. And it's not because we don't see a ton of interesting opportunities in deal flow there. It's because the risk adjusted returns on where other people in the market were willing to do deals in different parts of the capital structure was fundamentally something that we really struggled to get comfortable with.
- [36:21]
B
As more capitals come into the infrastructure space, have deals gotten larger and has that impacted the credit side of when and where you're able to do a deal or even your underwriting? And has it had to stretch some of your underwriting to be able to do deals?
- [36:38]
A
No, I would say because more capital comes into infrastructure, private investors in this market are taking larger businesses private, they're building larger projects. Those types of projects typically have access to very cheap capital. And so I think one of the things we haven't talked about is ABF as an asset class. And what's growing there? And so a lot of the ABF market, which is really insurance capital that is being put to work in custom bespoke, longer duration investment grade assets, assets. A lot of that is infrastructure. That's not a market that we're in today for our credit business specifically we're financing a different part of the market, but that market has grown tremendously. Infrastructure is a core part and a core tenant of the thesis of that.
- [37:17]
B
So you're doing non ig, but yet these are often hard assets that you're backing. How do you think about that risk
- [37:26]
A
profile to be investment grade, at least as the rating agencies typically there's a size threshold ultimately that you have have to achieve. And so most of the businesses we're financing, I would say a lot of times exhibit facets of the investment grade world. Contracts. Inflation, linkage, good margins, really good stability, a moat around the business. But ultimately they're just never going to be of the size and scale to be screened as investment grade. And so we think about our credit risk as typically high, single B, low double B for the types of collateral that we're lending against. As businesses scale up into that world, they start having access to obviously a very different, different capital base. But we are targeting mostly earlier stage, mostly growth based businesses that are consuming capital at the platform level. And we just have the benefit of the security of those underlying hard assets. To be investment grade, you need diversification in customer base. You need more than 2, 3 key assets may have hundreds of assets around the country. And so I think the scale for the companies that we're looking at is really what keeps them out of being true investment grade companies.
- [38:25]
B
What are the biggest risks risks that you think about when you're underwriting these assets?
- [38:30]
A
A lot of these assets have releasing risk that we have to get comfortable with. A lot of the assets have like loan to value is a key component of what we do. And that starts out at loan to cost if we're building something new. But underwriting that value is not just what somebody paid for it and saying if they paid 200 and I lent 100, I'm 50% loan to value. Well that's not true. You're 50% loan to cost on what somebody else may have paid for it. But you have to think about what's the underlying economic value of the asset. And so, so making sure that we underwrite conservatively for what the value of that is. I'll give you an interesting example. We've got a couple fiber to the home loans That's a huge space in the infrastructure market. A lot of infrastructure investors both in the US and Europe have pursued the space. A lot of capital going in to upgrade residential broadband networks. There are a lot of platforms in the us it's very entrepreneurial, frankly. Reminds me of the shale boom where you had sponsor backed companies with equity checks, land grab, trying to beat the big guys. And so they're going out there where the Lex aren't building and focusing on markets where they can beat them, build really high quality networks with the view that this space will eventually consolidate, they'll sell up into those businesses or into very large sponsors. We lend to that space, but we do it in a very narrow rubric and we're very, very focused on underwriting penetration assumptions, ARPU assumptions and ultimately like loan to cost governors on our loan that we always feel under a conservative case there is a terminal EBITDA multiple of leverage that makes our loan refinancing and if not they're feeling very comfortable that we could take control of that asset, that network and there would be a line of buyers through our cost basis where they could plug that in synergistically into their operations and make it very, very accretive for them. And so those businesses, sometimes when you lend to them, day one, our EBITDA break even because the sponsor has scaled the company itself with a salesforce and a management team to pass 500,000 homes. And you may only have 100,000 homes today. So it is a growth platform business business. The underlying asset's a hard asset, but you're competitive, you're competing against people for customers. And so in that instance, like is this example, you don't have that long duration contract, you have a clear loan to value coverage base of the asset itself. You're very well protected, but you are taking a view. What does the competitive dynamic look like? What's the pricing? Someone's willing to pay for that asset. And so that's a different underwrite as
- [40:46]
B
you talked about a little bit earlier. And it kind of relates to your background too. There's shades of a little bit of a equity underwrite in terms of understanding the growth of a business. And then obviously a credit and downside protection underwrite. Is there a right skill set or a different skill set to be a great infrastructure credit investor?
- [41:08]
A
Honestly, I don't think it's that differentiated from being a good credit investor. We look for certain things for people in our teams. It's interesting. Private credit usually builds its teams out of really two main places is it's the leverage finance machinery of investment banks which is great originators, thoughtful, creative, hard working people who are going out convincing people to take their capital, doing what they need to do to structure it to get a deal done. And that's a core piece of what we have to do as well. Right. So that origination, that structuring effort, a lot of that skill set comes from leverage finance. And then you look at just buy side shops and there's a whole bunch of different verticals. Whether you're doing value based investment, long only credit or hedge funds, distress funds, et cetera. Our team has come from a pretty interesting background. We don't have a lot of lead thin power bankers here on our infrastructure credit team. Most of the folks on our team have come from pretty value based or distressed based backgrounds covering infrastructure sectors. And so these are people that have found their way through different paths but ultimately were responsible before coming here for putting capital to work in a sector that we know really really well. Well, but doing it in a very, you know, what I'll call complicated credit mindset. So not managing long only super diversified portfolios at a mutual fund where you're doing very little diligence because it's a half a percent position and you're sprinkling the market trying to eat basis points out versus an index. We usually find folks that are taking concentrated bets on things as a result force themselves to do a lot of diligence to understand sectors in the asset base, to get comfortable comfortable and then are very comfortable simulating bankruptcy and frankly working through what happens if this goes wrong. We don't have a workouts team that we shelve it to. We own our investments from origination to execution to monitoring to if something goes wrong, what do we do? And so as a result on the front end we're thinking about all those things. Day one. A lot of our investment memos include downside recovery analysis, simulated bankruptcy. How do we protect capital in the worst case scenario? We're very comfortable working through that process. I think it's a unique skill set for our team. Team.
- [43:09]
B
If you were interviewing someone to join your team and they had an infrastructure background and you asked them the question what be the most non obvious insight into the infrastructure market? What answer would you like to hear
- [43:25]
A
the most non obvious insight? Man, I'd like to hear something today. I'd like to hear somebody who was thinking on the contrarian side of everything going on in AI AI and thinking about the downside because I think it's very easy when there's a lot of capital chasing a really sexy theme like AI, there's tech disruption, there's headlines every day, and there's a lot of money being raised to get caught up in, hey, we can deploy a lot of capital into this industry and there's contracts and there's everything on the face of it that looks really, really interesting. And I'd love to interview somebody that was really thinking about the downside perspective of that and really thinking about what could go wrong, what they see as a potential opportunity and some chaos in the space and how they would play it from perspective.
- [44:09]
B
What are you most worried about in that space?
- [44:12]
A
I think one of the things that worries me the most today is corporate behavior. And what I mean by that is I get pretty concerned from just a high level perspective when you see the circularity in capital flows that we're seeing today. And this is not unique to me. This is a theme that's been touched on. Look, I think it's very different than what we saw in 2000's telecom. And my partner Michael Leitner can give away better insight into this as he lived and breathed that sector at that time. But ultimately there you had network companies building infrastructure as a building fiber on spec, buying capacity from each other and booking it as revenue. But you had no end customer actually using the underlying fiber. And so these companies would build a route here from A to b. They'd have 148 fiber strands in the ground, 144 fiber strands, somebody would buy 10 of them, they'd book revenue, revenue. But that other company was a network operator and they were just buying nor access. And so they were literally buying each other's access to build these networks up. And then one day everybody woke up and there's no real end market demand for all this capital that we've spent and we've torched a bunch of capital. Now what's interesting is that all of that investment is now serving as the backbone of the Internet that we use today. And it was actually a great long term investment. They just borrowed way too much money and did it in a way that wasn't a problem appropriate. Today it's very different. You have very large, almost debt free companies in the hyperscalers. These are the best balance sheets in the world. You have the most valuable company in the world and Nvidia doing a lot of this. But when you see things like Nvidia who is making hardware, investing money into a customer that buys that hardware and then on the back end that hardware gets Leased by Nvidia for use and proof. Cases like that is very circular demand. That is very hard to tell from the investor perspective. Are there end customers actually using this stuff and paying per month for applications and AI software and things that are being run on this infrastructure that justifies the cash flows? Because the cash flows can only come circularly while people are continuing to raise money. And once that stops, that internal circularity ends and cash flows have to come from end customers like you and I paying per month on our phones for OpenAI products and what have you. And so we're still very early in that adoption phase. I think everyone's very bullish about it and they're right to be. It's fascinating and it's incredible what I think a lot of these technologies are going to do. But saying who's going to win that race and how big that pie is ultimately going to be I think is very, very hard.
- [46:40]
B
How do you think about navigating those nuances of what you just said, both in terms of finding the right opportunity that make sense on a risk adjusted basis, but also limiting your downside to some of the potential issues that you reference?
- [46:56]
A
Data centers is the biggest sector that's exposed to this theme. And I think we are focused on the part of that market where we can get the spreads that we need for our funds, which usually means these are smaller platforms, maybe couple facilities. A lot of times we're looking at existing traditional colocation businesses where they're looking to stretch leverage on this existing business business to expand one of their facilities to target a hyperscale customer. So it's just an existing retail enterprise colo business that's not an AI hyperscale data center type business at all. But there's an opportunity to expand and given this point in time in the market where they have access to power and land, they have the opportunity to step in and do that. So there's interesting parts of that market, but I think it's really all about feeling good about the facility that secures your loan. And if you don't have that confidence, confidence, you better be lending to a situation where you have 100 confidence that the tenant is going to pay the bills that is going to service your debt. Seven years from now after a hyperscale lease is up, I think the world's going to look very different, technology wise for what AI is. And I, I'm not going to pretend I'm even remotely close enough to having a view on what that's ultimately going to look like. I just know it's going to look very different. There's too much incentive for chips to get more efficient because we can't build all the power that people think we're going to need. Need. Elon Musk wants to put data centers in space. Could that happen? People are talking about it. So seven to 10 years from now, I don't know what the world ultimately looks like. And so I think the sector has release risk. And so you have to be comfortable that you're lending to a facility that has as limited downside risk from that perspective as possible, which is why that pushes us away from it's attractive today, which is where can I get cheap power the fastest? And ultimately a lot of times that's in remote areas. And that's great from Amazon's perspective because I can sign a cheaper lease, I get the data center today, I get my power. Power. I may be training stuff that's not as latency sensitive or using it for something that doesn't need to be downtown Chicago or downtown New York. And so it serves their need. But let's not pretend that lending to that building is the same as lending to a building right next to New York that's doing something different. Like they are different applications. One, you can still do an investment grade loan if the bulletproof contract with Amazon and they're going to pay the bills and the person running the data center is going to make sure it doesn't violate the SLAs and the contract so that they can get out of it. Amazon's not going to go bankrupt. I don't think anyone thinks that. And so that may be a perfectly fine loan. But ultimately we're always challenging ourselves to think if we have to own this asset, what are we going to do with it? And I'm not sure you can turn some of those data centers into a Walmart ten years from now. Who knows?
- [49:21]
B
Infrastructure credit is a bit newer as an asset class. One of the questions that keeps coming up is is there demand for it from investors? What have you seen thus far from investors as it relates to infrastructure credit? And is it generally existing investors in infrastruct equity who are like, yeah, I want some exposure to a different flavor of the market and I want some infrastructure credit exposure. Is it net new investors coming in saying I want exposure to infrastructure credit may be an easier on ramp than equity? What has that looked like from an investor demand perspective?
- [49:55]
A
We have an incredibly supportive global LP base here at Stone Peak that we talk to frequently. I think on the institutional side there's really two flavors. There's infrastructure groups, so there's, there's teams at pension plans and sovereign wealth funds and insurance companies and the like who are dedicated to deploying capital into infrastructure. And so they're evaluating all the different options. Some folks are only equity, some folks are equity and credit. Some folks are even just credit if you're at an insurance company. And so these are people that understand the asset class. They know it well. And oftentimes at a pension plan, for example, they're evaluating equity and credit alongside each other and they're thinking about what are the relative risk adjusted returns I'm trying to create what are my objectives overall, my infrastructure program and thinking about core, which is long duration yield, focused equity of very large long duration assets, value add. And then there's different other specialist products and renewables and geographic products like Asia, and then there's credit. And so how does credit fit in? And credit offers today very similar cash yield characteristics to something like a core investment investment, but at a much lower basis in assets, but different sets of assets. For us, it's middle market assets, they're more growthier. Core funds are lending to highly durable defensible utilities that have significantly less volatility than some more middle market businesses. But we're creating exposure to those businesses at 50 to 60 cents on the dollar versus an equity layer. And so there's different puts and takes. But I think the asset class in general has continued to garner more and more attention from infrastructure structure, institutional investors because of the predictable yields, the very low loss ratios and the overall returns.
- [51:31]
B
Where are investors taking that capital from? Because I think sometimes the bucketing of a strategy or an investment product matters so much as investors think about asset allocation because they just need a bucket
- [51:43]
A
to put it in. Infrastructure has taken away from historically and institutional sides common equity allocations, which had been falling and have certainly continued to fall as the market's so high, high traditional hedge fund allocations and sometimes even private equity. And so the infrastructure part of the pie has grown in real estate funds. General corporate real estate funds have struggled as well. Specialist funds have been okay, so usually from those asset classes is where we're seeing dollars flow.
- [52:09]
B
Do investors think about infrastructure credit as part of the overall infrastructure bucket, and they're making a decision either in for equity and for credit, or they're just saying, here's my infra allocation, I'm going to allocate X to infra equity, y to infra credit, or are they taking a different approach and saying infra Credit's more like credit I'm going to put in my credit bucket and then piece together the allocation across my credit bucket. More broadly, infra credit is going to be a piece of that. And maybe it has a slightly different risk profile, a little bit of a different ball, maybe different duration.
- [52:43]
A
If you have the list of LPs that have the map on how they set that thing up, I'd love to borrow it from you because. Because that is exactly a puzzle that oftentimes we have to solve. It really depends on the investor. The more built out the infrastructure team is, the longer they've been deploying capital, I find that they traditionally will be responsible for the entire scope of the infrastructure, including credit. The less developed the infrastructure program is specifically, the more often than not for infra credit specifically, I'm talking to the person allocating to private credit. And that conversation is the same in many ways, but it's also very different because they're thinking not about how does infra credit fit within my infra program. They're thinking about how does infra credit fit alongside all these other parts of the credit markets that I'm allocating to. And so I have a Blackstone or an Aries Direct lending fund. Why should I include infra credit alongside these long standing relationships I've had in core direct lending? And so oftentimes our conversations with them will pivot to much more of the asset class focused. What are we doing that you're not seeing today? Why are we not asking you to take a different view on yield or risk, explaining that asset class where I'm not explaining the asset class as much to somebody in infrastructure, a lot of times I'm explaining just absolute returns and they're deciding how this fits alongside everything else they're doing.
- [53:56]
B
I think that brings up another interesting and important point, which is the broader platform of Stone Peak. You have exposure on the infra equity side, you have exposure on the infra credit side. How much does having this broader platform as a scaled specialist help you really understand what's going on in the market?
- [54:18]
A
It's imperative. And I think as we talked about previously, having an incredibly deep level of expertise in these sectors is crucial to finding the right transactions, doing the right amount of diligence and diligence in the right things that you need to really understand, and then ultimately to achieving successful exits on investments. And that's no different in equity than it is in credit. And so for our credit business, having access to this global platform, 350 people globally living and Breathing infrastructure and real assets every day. It's a huge advantage. And so our ability to benefit from deeply researched thematics across the firm, our ability to Access Portfolio Company CEOs and our Equity deal teams is huge. And so it allows us to not only sometimes source really interesting opportunities, but also get to the right answer on diligence very quickly. Get the scoop on an asset that might have been in market that they may have looked at previously, they may already have a view on. It is incredibly powerful tool for us as we look to execute investments. What I will say on the flip side of that is we have developed very rigorous procedures in place where we can protect borrower data from the equity conflicts that may arise. And that's a question that we get asked a lot. And it's super important for us. It's mission critical. And so I like to think about it as we get the benefit of the intellectual property. But when somebody says, I want you to lend to my fiber to the home business, but you guys own a fiber business down the street, pretty sensitive data, we wall off that from the rest of the firm. And so only our credit team executes that. We have a separate credit investment committee, obviously that meets with more rigor and a lot more cadence than our regular investment committee on the equity side. So we have the ability to protect our borrower clients from data concerns that they may have with the broader platform, which is really just a very good setup for us to get the benefits of both worlds.
- [55:57]
B
Infrastructure has obviously evolved since you. You started your career in energy and power. It feels like it's infrastructure's time now, when you had started, and you've obviously had a few different types of roles with different vantage points, could you have imagined infrastructure evolving into the asset class that it is today?
- [56:17]
A
I never considered myself an infrastructure investor until I came here. Frankly. I was somebody who covered energy and I knew the entire value chain extremely well. I was executing on upstream, midstream services, downstream deals. And it wasn't until I got to Stonepe that I really got to dive into the other sectors within infrastructure. But it's been an incredible ride to watch the industry in general and certainly here at Stonepeat, the growth that we've had, the tailwinds of just the asset class and the need for capital and the expertise to bring that capital in creative ways has been incredible to watch.
- [56:50]
B
It's taken 14 years to get to 76 billion or so of AUM, which is remarkable. But it also feels like I'm getting
- [56:56]
A
my butt kicked by the equity Guys on AUM growth, they make sure that I don't forget it.
- [57:01]
B
That brings up an interesting question. Do you think that the credit market will become as big or bigger than the infrastructure equity market? Or will the dynamics kind of mirror private equity private credit in your mind in that sense?
- [57:15]
A
I don't think the market for non investment grade infrastructure credit is going to be something that scales at the same level as core direct lending because because of the maturation phase of these businesses we talked about, it's a great exit vector for us, but there's not that many very large infrastructure companies taking $4 billion loans like that. They have access to much cheaper cost of capital. And so when you think about total capital deployed across take the biggest funds, gip, Brookfield us the amount of private credit financing their flagship billion dollar plus deals is very small. And so the banks are still highly active in the larger part of that space.
- [57:52]
B
Space.
- [57:52]
A
So I think the real opportunity for us is to go displace a lot of the different investors, regional banks, the term loan B market, other direct lending, private credit sources and say, hey, there's an opportunity to work with asset specialists who understand your business, who can be much more creative on asset specific terms in the docs, more DDTL capacity to allow you to do things that other parts of that market that are feeding the middle market and infrastructure can't necessarily do. And so there's a massive opportunity for, for us to grow and scale and get our brand and what we can do out into the market to win. I think the infrastructure equity market has tremendous tailwinds to continue growing. I think the private markets are going to offer a massive solution to the infrastructure funding gap because you look at federal and state budgets and you look at the setup there, especially if rates stay high, there's just not going to be a lot of efficient public funding that goes into a lot of these things. And the private market has proven it can be a very, very credible solution for doing that.
- [58:47]
B
We talked a lot about risks in this conversation, as we should in that A because you're a credit investor, but B because I think with any market that grows, it's always prudent to really think about all the risks in spite of everything that's happening and all the exciting themes and trends that are going on that's creating a excitement around growth and financing deals, et cetera. I want to flip to the other side of this though and look at the optics Pessimistic side of the coin. What are you most excited about in infrastructure going forward?
- [59:18]
A
I Think it's just the amount of capital that's going into upgrading the infrastructure. Both building new interesting infrastructure solutions to support next generation AI technologies. The energy transition decarbonization opportunities, like all of these things require long duration heavy equipment assets that are providing infrastructure services that are mission critical. And so the opportunity to work in a sector that is continuing to evolve and redefine itself and also open up new and interesting markets is fascinating. So infrastructure I think is for the first time in its own way as its own asset class has grown, become on the forefront of defining what's next. And I think ultimately a lot of times we were reactive 15 years ago in a sense everyone knew what the core part of infrastructure was. But as we started stepping out into other parts of the market it was hey, these assets used to not really be core parts of infrastructure. But if you looked at fiber, all of fiber is an infrastructure. But there are parts of that market that have long duration dark fiber contracts and started there. And so like data centers used to be regular private equity or real estate. And then you started seeing the embedded nature of meet me rooms and interconnectivity franchises. These are 50 year assets, these are infra assets. We started being a little bit more reactive in pulling but now I think we're on the forefront of defining some of these new things and so things in the energy transition space for examp, that is an infrastructure sector where we are going in, we're developing technologies for the first time and these technologies are going to grow into true infrastructure characteristic assets. And so they're being incubated a lot of times by infrastructure professionals. But ultimately these assets are going to grow and they're going to garner the hydrogen side for energy long term contracts with credible off takers, mission critical businesses serving infrastructure like services. That to me is the exciting part of our business.
- [61:04]
B
I think that's such a great way to wrap up this conversation. A lot of mission critical services, real assets for real life. You talked about that in a number of ways. And infrastructure space is growing so much. The need to finance all of these things that we use every day. We may not see it maybe invisible, but it's so core to what we do. So this was a fascinating conversation.
- [61:25]
A
Thanks so much Ryan. I've really enjoyed it man. Thanks so much for having me.
- [61:28]
B
Likewise.
- [61:28]
A
Cheers bud.
- [61:29]
B
Thanks for listening to this episode of Alt Goes Mainstream. I hope you enjoyed it. You can read more about Alts at my substack. Alt goes mainstream.substack.com Thanks a lot and have a great day.