Talk Your Book: How Infrastructure Funds Work

Summary

Animal Spirits Podcast – Talk Your Book: How Infrastructure Funds Work

Host: The Compound (Michael Batnick & Ben Carlson)
Guest: Scott Littman, Managing Director and Portfolio Manager at GCM Grosvenor
Date: October 13, 2025

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Episode Overview

This episode features a deep-dive conversation with Scott Littman on infrastructure funds: what they are, how they work, where opportunities and risks lie, and why this asset class is increasingly on the radar of both institutional and retail investors. The hosts probe the ins and outs of investing in infrastructure assets—from toll roads and airports to the new frontier of data centers—and explore how energy demand, private funding, and cash flow certainty shape the landscape.

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Key Discussion Points & Insights

1. Infrastructure as an Asset Class

• [00:37] Infrastructure encompasses a range of assets beyond the usual roads and bridges, including airports, data centers, energy plants, and digital infrastructure.
• The sector is becoming a "new asset class" for many investors, especially retail and advisors who've largely overlooked it in favor of more traditional investments.

2. Data Centers & Energy Demand

• [03:11] Scott Littman: "We're in the first two innings, so we got a long way to go. It's an exciting time, but as with any megatrend, there are pitfalls."
• The explosive growth in data centers—particularly driven by AI—creates a massive, ongoing need for both physical infrastructure and incremental power supply.
• [03:53] Demand for power had been flat for two decades, but data centers have caused that to ramp up significantly.

3. Types of Infrastructure Investments and Their Risks

• [05:25] Scott Littman: Differentiates between stable, long-term cash flow investments (like contracting with hyperscalers for data centers for 15-20 years) and riskier ventures (speculative builds with uncertain tenants).
• Focus is on certainty of cash flows; investments with major, long-term contracts are less risky than speculative builds.

4. Energy vs Digital Infrastructure

• [07:16] Energy infrastructure includes power plants (gas, solar, wind, hydro, etc.), battery storage, and evolving technologies like hydrogen and geothermal.
• Digital infrastructure is made up of:
  • Data centers
  • Fiber networks (the "highways" of data)
  • Wireless towers
• Increasingly, power can be contracted or self-supplied for data centers, sometimes bypassing the grid entirely.

5. Growth Outlook

• [10:04] Scott Littman: "At a minimum, I think we're looking at increasing energy supply and increasing data storage need for easily the next 15 to 20 years."
• From now through at least 2030, data center demand for power is expected to quadruple. Data centers may double their share of national energy use from 5% to over 10%.

6. Accessing Infrastructure as an Investor

• [11:32] Public options: Infrastructure ETFs, utility stocks (like Constellation Energy), and MLPs.
• [12:22] Many data centers are accessed through REITs, but private vehicles remain the dominant route for direct infrastructure exposure, especially for high-net-worth and institutional investors.

7. Leverage in Infrastructure Investing

• [12:59] Leverage is standard in infrastructure, typically applied at the asset level, allowing greater returns when cash flows are stable (e.g., a Microsoft-backed data center contract).

8. Infrastructure vs Other Alternatives

• [14:16] Infrastructure investment is maturing for private capital; Australia and Canada are early adopters due to their energy sectors and pension environments.
• Increased volatility in traditional real estate is pushing investors toward the relative stability and attractive returns of infrastructure.

9. Returns: Income Play or Capital Appreciation?

• [17:06] Scott Littman: "Historically infrastructure has been viewed as an income play, as a low return, high yield income play... That's not exactly the way that we play the space."
• Today, the best opportunities offer a blended return: yield plus growth, moving beyond just fixed-income replacement.

10. Exiting Infrastructure Investments

• [18:04] Exits vary:
  • Long-term income streams (eg. holding airport stakes for steady yield)
  • Building out and system improvements, then exiting post-construction or ramp to lower cost of capital buyers
• Scarcity (like limited airport gates) drives sticky revenues and stable returns.

11. How Infrastructure Funds Source and Underwrite Deals

• [23:05] Fund approach: Some are ‘single artist albums’ (all deals from one sponsor), while others (like GCM Grosvenor) offer a ‘mixtape’—a diversified suite of the best deals across sponsors, sectors, and roles.
• [24:45] Deals come via reputation, capital provision, and willingness to partner—phone is “always ringing” due to huge capital needs in infra projects.
• [25:50] Underwriting is both quantitative and qualitative, involving specialists who formerly invested for control and who can assess cash flow, asset quality, and sponsor alignment.

12. Red Flags in Infrastructure Investing

• [27:30] Top concerns: Lack of cash flow certainty, speculative “greenfield” (new-build) projects, aggressive or unusual growth assumptions, and outlier pricing.
• Successful underwriting is as much about spotting "obvious" mismatches and overly optimistic projections as picking winners.

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Notable Quotes & Memorable Moments

• On the nascent state of data center investment:
  Scott Littman [03:11]:
  "We're in the first two innings, so we got a long way to go. It's an exciting time, but as with any megatrend, there are pitfalls."

• On how infrastructure funds can operate like a ‘greatest hits mixtape’:
  Scott Littman [24:02]:
  "Rather than listen to 30 songs by the same artist, I want the top two songs by the top 20 artists that I like."

• On the risk-return profile:
  Scott Littman [17:06]:
  "Historically infrastructure has been viewed as an income play, as a low return, high yield income play. Quite frankly, it was considered for years and years as a fixed income replacement. That's not exactly the way that we play the space."

• On deal flow in infrastructure:
  Scott Littman [24:45]:
  "The phone's always ringing. There's always somebody that wants and needs a partner in a deal. Sometimes it's the biggest players in the space, sometimes it's the new entrants..."

• On diligence and investor caution:
  Michael Batnick [29:55]:
  "Please make sure you do all the diligence necessary because this is very different than buying a stock or an ETF or an index or anything that we're, you know, used to doing on a day to day basis."

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Timestamps for Important Segments

• Asset class overview and contemporary relevance: [00:43] - [02:24]
• Explosive growth and need for data centers: [03:11] - [04:53]
• Data centers vs other real estate, risk distinctions: [05:25] - [06:52]
• Energy & digital infrastructure breakdown: [07:16] - [09:55]
• Growth outlook through 2030+: [10:04] - [11:13]
• How to invest in infrastructure—public and private options: [11:32] - [12:53]
• Leverage in infrastructure: [12:59]
• Comparison to other alternative investments: [14:16] - [16:57]
• Yield vs appreciation: [17:06]
• Exit strategies: [18:04]
• Deal sourcing—the "mixtape" analogy: [23:05] - [24:40]
• Underwriting process: [25:50]
• Evaluating and skimming out poor deals: [27:21] - [29:22]

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Summary Takeaways

• Infrastructure investing is no longer the preserve of governments and pension funds—retail access is expanding, though with complex risks.
• The rise of AI and digital transformation is turbocharging demand for data centers, making power and energy infrastructure a growth market.
• Infrastructure funds can deliver a mix of income and growth with relatively stable, predictable cash flows—if investments are well-underwritten and contracts are robust.
• The best funds seek diversification not just across assets but also sponsors, sectors, and deal structures.
• As with all alternatives, deep diligence is vital—investors must be wary of deals with aggressive assumptions, speculative projects, or unclear cash flow prospects.

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For more information on infrastructure investing and the Scion Grosvenor Infrastructure Fund, listeners are directed to the Scion Investments and GCM Grosvenor websites.

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This summary is designed to give a full, clear sense of the episode’s key insights, structure, and tone for listeners who want the vital takeaways—minus the small talk and sponsors.

Transcript

[Ben Carlson]

Today's Animal Spirits Talk. Your book is brought to you by Scion Investments. Go to scioninvestments.com that's C I O N to check out the Scion grosvenor infrastructure fund scioninvestments.com to learn more.

[Podcast Disclaimer/Intro]

Welcome to Animal Spirits, a show about markets, life and investing. Join Michael Batnik and Ben Carlson as they talk about what they're reading, writing, and watching. All opinions expressed by Michael and Ben are solely their own opinion and do not reflect the opinion of Rithol's Wealth Management. This podcast is for informational purposes only, should not be relied upon for any investment decisions. Clients of Ritholtz Wealth Management may maintain positions in the securities discussed in this podcast.

[Michael Batnik]

Welcome to Analyst Threads with Michael and Ben. On today's show, we are rejoined by Scott Littman, who is a managing director and Portfolio manager at GCM Grosvenor. On today's show, we dive back into infrastructure and get more granular as to what exactly are these investments. And we've done like, the roads and all that sort of stuff, but what else is out there? So, for example, I, last week or this week was driving to JFK on my way to Boston, and they're redoing the terminal. I don't know how long it's going to take.

[Ben Carlson]

They feel jealous about LaGuardia's redo, as they should.

[Michael Batnik]

It's a disaster.

[Ben Carlson]

So JFK is the worst one now.

[Scott Littman]

Yeah.

[Ben Carlson]

Okay.

[Michael Batnik]

And Lord knows how the, how long that's going to take getting that sweet, sweet government money. And I guess not just government money, of course.

[Scott Littman]

It's.

[Michael Batnik]

There's private funding. That's what we talk about today, right?

[Ben Carlson]

It's toll roads, it's airports, it's. It's a lot of things.

[Michael Batnik]

Data centers. These are things that are highly, highly capital intensive. So we spoke today about the opportunities, the risks and reward, the risk profile, the, the cash flows, the leverage, like, really went 30 minutes deep.

[Ben Carlson]

It really is a new asset class for a lot of people. I, we invested in infrastructure funds at my old endowment fund, and even then it was still relatively new to think about. And so especially for advisors and retail investors, it's a whole new thing that they've never really heard of before.

[Michael Batnik]

I think it's one of those things that, like, intuitively makes sense. Like. Yeah, yeah, it's like sort of like a farmland. Yeah, I understand. I mean, obviously there's nuance involved, right? Like a million things to unpack. But at its core, it's a pretty. It's A concept that resonates.

[Ben Carlson]

Yeah. All right, so here's our talk with Scott Levin.

[Michael Batnik]

Scott, welcome back to the show.

[Scott Littman]

Thanks, guys. It's great to be back. Enjoyed it the last time. All right.

[Michael Batnik]

The biggest topic in the market these days was sparked by the news of the Oracle OpenAI. Yes, Oracle OpenAI partnership money is booming. The next leg of the rally is going to be financed not just with free cash flow, of which there's an ample amount, but also with debt. So how are you all thinking about data centers? Hyperscalers, negative cash flow? Where. Where are we in the cycle? What's going on?

[Scott Littman]

We're in the first two innings, so we got a long way to go. It's an exciting time, but as with any megatrend, there are pitfalls. Right, so as we look at this opportunity, what do we know? We know that the need for incremental data center capacity is massive. Hard to even put a number on it. 4x5x10x. It's tremendous. As a result, the need for incremental power is finally seeing very significant increases in demand for the first time. Really. So if you look at power demand for the last almost 20 years, certainly the last 15 years, it's been almost flat. But with the interjection of the demand from data centers, we are finally seeing a significant ramp. These growth profiles present tremendous opportunity, but also some tremendous risk. And so, one, we're going to see a ton of capital go into the space. Not all those opportunities are going to be great, created equal. And two, where that capital goes and where the opportunity lies is going to be a function of one, certainly what can be built and where. So land and labor, but also the ability to connect to power. And those are going to be some of the biggest questions that we have to answer in the next 10 to 15 years.

[Ben Carlson]

So we actually had a client come to us a few months ago and said, hey, people in my rich person circle are investing in data centers. Like, I'm hearing about it, you know, from these people, is this something I should be investing in? And said, look into it for me. And the big question was, like, what's the difference between investing in these data centers and just investing in any other real estate? And so I guess my question is, like, is there anything special about investing in these things? Or is it really just like, you're thinking through the cap rate? Like, what exactly is the opportunity here?

[Scott Littman]

I think there's a couple of ways to look at it, and the way that different investors approach it is what drives the differences. So for Example, some folks are exclusively focused on working only with the hyperscalers and working only with someone that will sign up a 15 or 20 year contract. That's a very different underwrite than somebody that's going to build a box with air conditioning and try to find people to come and use it as a data center. Right? And so the economics around that are very different and so is the risk. I will tell you, as an infrastructure investment, we want certainty of cash flows, right? So we love that opportunity to invest with a hyperscaler. That's going to give you 20 years of contract tenor, that gives you your cash flow. And then we still have to think about, okay, what happens at the end of that period. But there's a lot more certainty there versus that other scenario where you buy a great piece of land and there's folks that do this, buy a great piece of land, you build a data center, you try to fill it, and if you don't fill it, you know, you got a great piece of land, but a totally different underwrite.

[Michael Batnik]

You mentioned the amount of energy that's going to be needed to power these data centers. In looking at the portfolio, I see you all break it down by energy, energy transition as well as digital infrastructure. Help us unpack what the differences between those two things are and where is the power coming from.

[Scott Littman]

In some cases that's really easy and in some places you'll see some pretty significant overlap. So let's start with the energy side. That's easy. Energy has been investable as an infrastructure opportunity for 25, 30, 40 years. And what is energy? It's power plants. It is gas fired power power plants, frankly, it used to be coal fired power plants a lot less. So now it's solar, it's wind, it's hydro, it's biomass. Now you're seeing things like geothermal, you're seeing hydrogen, not so much nuclear here in the US but that will exist worldwide. All of those different elements are energy. And now you're also seeing some additive technologies, things like battery storage, which allows you to take energy when it's produced, store it and then put it back into the grid at the right point in time. All of that's energy. Digital for us, for most, can be broken down into three categories. Data centers, fiber, which is what's connecting, you know, the highways, if you will, moving information, and towers, which is the wireless equivalent. And so those are the three elements of digital. What's happening now in the data center space in particular related to AI is you have all this need for Data storage, that's what the data center does. And you have to power that somehow to keep it cool and to run all the servers in the space. So one, you can connect to a grid existing power supply coming from existing power production. Two, you can start to put some batteries on the site and store your own power. Three, you could throw some solar panels up on the roof and reduce your need from the grid. And four, and what we're seeing more and more now for the first time, is you can transact directly with power supply that has no intention of selling into the grid and is basically built on a built for purpose basis just for you. So lots of different ways to kind of be engaged in the space from both the digital and the energy supply side.

[Ben Carlson]

So you said that this is maybe the first or second inning and with the caveat that no one really knows how this is going to play out. Like, how long do you see this build out happening for?

[Scott Littman]

As we think about the build out, at a minimum, I think we're looking at increasing energy supply and increasing data storage need for easily the next 15 to 20 years.

[Ben Carlson]

Wow.

[Scott Littman]

Right. So that's the starting point. I think if you look at the trajectory of that curve between now and 2030, it's straight up and down on the data center side. So going from, I don't know, 150 gigawatts of supply today to 600 or so when we get to 2030. But then, and the energy is a little bit more muted because data centers, believe it or not, today data centers only really represent about 5% of energy uses. They expect that to double over that same period of time to something closer to 10, 11%. So power demand is made up of a lot of different things. Data centers are still a small piece of just the fastest growing part of what's coming in the next five to 10 years.

[Michael Batnik]

We're here today talking about the Scion Grosvenor Infrastructure Fund. The ticker is CGI qx. Are there any ways or are there ways for investors to get access to infrastructure in public vehicles? Or is private infrastructure the only play?

[Scott Littman]

I think there are lots of ways to play the infrastructure space. There are ETFs that focus on infrastructure in the public space and there are companies, right? I mean, the utility companies are a great example. Some of the ipps, the independent power producers, take a look at a stock like Constellation Energy and take a look at how that's run over the last two years. It's had an extraordinary run. So I do think there are ways MLPs are a way that people have played the midstream space. They've had a complicated history, certainly. I'm sure you guys followed that in. Great.

[Michael Batnik]

That's a good word, Good word to describe it.

[Ben Carlson]

But the yields.

[Scott Littman]

But yeah, sometimes, yeah.

[Michael Batnik]

Scott, what is the toll booth for for data centers? Please tell us.

[Scott Littman]

A lot of the data center. A lot of the data center exposure right now is held in REITs. So you're seeing it in vehicles that have a much more kind of real estate sort of orientation, but one that's used in the infrastructure space as well. And then a lot of the access otherwise is still through private vehicles. Right. Which is why I think to Ben's earlier point, you're hearing about some of the high net worths that are going and finding these opportunities in more bespoke ways.

[Michael Batnik]

A lot of private investments use leverage. Is that the case with, with the way you all deploy money as well?

[Scott Littman]

Yeah. So we, and everybody really that plays in the infrastructure space is utilizing leverage. Most of that leverage is utilized at the asset level. Right. So we're looking at cash flows and so a data center is no different. If we have, you know, Microsoft as a 20 or 25 year contract behind our data center, you can imagine that the certainty of that cash flow allows us to use meaningful leverage because of how comfortable the lenders can get with the credit of Microsoft as your offtake.

[Ben Carlson]

So there are a lot of financial advisors who don't really have the understanding or the expertise to invest in alts. And so a lot of times what they're doing today is going to a platform and they're saying, listen, the alternative investment universe is very wide. There's a lot of different fund options and strategies. Build me a diversified model because I, you know, I don't want to just invest in this one timeframe or this one strategy. And so a lot of times it'll look like a private equity fund and private credit for sure these days. And then venture capital and then infrastructure is usually in there as well. So what is it about infrastructure that makes it different from these other alternatives? And why is it typically part of that diversified alt structure for a lot of people?

[Scott Littman]

I think people will look at infrastructure, they'll do infrastructure a lot of different ways. And infrastructure a little bit like the transition to data centers and AI today is still in its early innings. Right. Infrastructure has been around forever, but private investment in infrastructure is still relatively new. I think the very first infrastructure funds that kind of existed probably developed in the 90s or maybe 2000. You know, Macquarie kind of one of the early leaders in this space, and the Australians were ahead of the game. The Canadians have always been big proponents.

[Ben Carlson]

I've always wondered why, why is that always, why is that such a big asset class in Australia? Because they have, like, a lot of the people have the retirement assets in those funds. Is it just because it, it kind of the fund structure started there, Macquarie was in Australia, like, what was it about that Australians were drawn to this asset class?

[Scott Littman]

Yeah, I, I think it's that they just had a really good product. I think it's because they had captive investment opportunity just given kind of, you know, what it takes to, to move things around Australia and to create power and, and some of the assets that were investable in the way that they utilize private capital. But now you're seeing it all over the place, right? And again, I think that the Canadians were early to it. The Canadians were early to it largely because of the energy sector, largely because they produced oil, they produced gas, they were very comfortable with what they were investing in. It was a big export. So they were able to kind of utilize that as a way to fuel opportunity. And so for a lot of folks, what you've got now is you've got the last 10, 15 years has just been tremendous in terms of the need for people to enter the space. The other thing you're seeing is you're seeing more volatility in other asset classes. Right? So with real estate being a little less predictable and having some real, you know, seeing some cracks in that market relative to Covid, relative to office space, et cetera, infrastructure is starting to really develop as a much more stable, less volatile way to a similar or even better returns. And that's what's getting people excited. The opportunity in the US has only opened up beyond energy with the need of municipal, state and federal government to go and capture private capital. And that's what opened it up. And now we're seeing a lot of opportunity that comes from that growing need to fund infrastructure.

[Michael Batnik]

The investment opportunity, is this an income play or is it capital appreciation? Or how do you think about infrastructure? How should investors think about it?

[Scott Littman]

I would tell you that historically infrastructure has been viewed as an income play, as a low return, high yield income play. Quite frankly, it was, it was considered for years and years as a fixed income replacement. That's not exactly the way that we play the space. That's not exactly the way that I would play the space. And the challenge to playing it in that way is that now you've seen interest Rates gap out, credit's a lot more interesting. And when credit approximates the outcomes from infrastructure, you'd rather be in credit. So for us, I think the opportunity here is something more blended. I think when we're looking at the opportunities around infrastructure, we do want yield, but we're marrying that to a return.

[Michael Batnik]

How do you get out of these investments? So, like let's use an airport, for example, and I know you all are active there. Do you exit the investment and if so, to who?

[Scott Littman]

How?

[Michael Batnik]

What does that look like?

[Scott Littman]

Yeah, it's a good question and I think the answer is different in each case depending on the profile of the investment that you own. So I'll say this. We see investments, we've looked at investments, we've participated in investments in JFK, in Heathrow, in LaGuardia, in a number of other airports around the world where we can find really stable yields. In some cases we'll stick around. Right? I mean, that's a, that's a really nice place to be. And what, what happens with those investments is those returns are really sticky because you have scarcity. And so there's only so many gates at jfk. So you got a pretty good idea that you've got the opportunity to put some pricing pressure on the airlines and you're going to have a continuing yield and you're going to be full. So when we can underwrite that revenue stream, we'll hang around. There are other ways to play the airport space where you're building out a terminal, you're making it better, you're making it more efficient, and that build out means you're going to bring airlines, you're going to try to increase volumes and at some point that will levelize. And so in that case, what we're doing is we're working through the construction phase, we're working through the ramp phase, and then we're looking to exit to a lower cost account.

[Ben Carlson]

So the idea behind infrastructure, and correct me if I'm wrong, is that you get a fairly stable cash flow base. So how are you, if that's the idea, how are you getting these yields if it's a relatively stable cash? Flows that are coming in one of two ways.

[Scott Littman]

One, you're getting a stable yield because you're taking some amount of growth or construction risk. And so the first few years you may not be seeing anything, but then you've built it to something. They'll call it building to core. And so you're building to something that's very yield, generative, and then you don't have to do much but maintain it in order to capture all of that future revenue. And you've got a 50 year concession, right? So you've got a long term concession with a port authority or a landowner or somebody else. You spend all the capex upfront and you're getting a return over a period of years that's highly predictable. That's one way. Another way you're taking it off of the balance sheet of a corporate that simply, you know, finds it dilutive to what they're otherwise doing. And so they're willing to guarantee you a certain customer contract relationship with minimum volumes that you can easily underwrite and you're solving backwards for a return that creates some real opportunity. I think I said there were two ways. I'll give you a third. The third is you're buying something that's out of favor. And so what do I mean by that? This is a really neat one. Three years ago, four years ago, everyone talked only about renewals, which is a little bit where people are today with data centers and AI. So what happens in those cases? A lot of capital chases them, they bid returns down. The cost of those things to participate goes up. What's interesting is when that happens, other things open up as opportunities. So when renewables got expensive, conventional power got cheap. So we did a lot of buying of conventional power and it had tremendous yields on it simply because there was a dearth of capital chasing it. So the opportunity was great. Some people didn't chase it for corporate reasons and policy reasons. Others didn't believe in the fact that it was going to be around in 10 years. I think they were wrong. And now you've got a new administration who's very bullish on conventional power. And you've seen this great opportunity that's all born from investments made three, four, five years ago. So a few different ways to achieve that yield.

[Michael Batnik]

I'm looking at some of your market and collateral and you've got your portfolio holdings and it shows what it is, it shows the sponsor and then it shows your role. So we've got your either a co investor, a consortium member, you've got secondary investor. What are some of these, what are some of these different terms that candidly I'm not super familiar with and I imagine a lot of the advisors listening to might might be like, huh.

[Scott Littman]

So I'll talk about this at a high level because I think this applies to just about any fund and it's just an approach thing. So I'll break this down and I'll do it in a way that I think it's kind of fun and clear. When you invest in a fund that seeks control of an investment, the only thing you get is, are deals sourced by that fund. Right. Because they need control. So what they're doing in that instance is they've got to go buy control. So if you're, if you're betting on that, whether it's any great fund in the market, you name it. I don't know, kkr, Macquarie, gip, they're all terrific. Blackstone. What you're going to get is you're going to get all KKR deals and all Blackstone deals and all Macquarie deals, because that's what they do. When you invest in a fund like ours, and there are many, that is more open architecture. We don't care whose deal it is, we just want good deals. Right. And so I call it the greatest hits of Infrastructure. Right. It's. It's a greatest hits approach where not only do you have diversification by deal and by sector, but you have it by sponsor. It's kind of like. It's kind of like making a mixtape for a long road trip. What I want to do is rather than listen to 30 songs by the same artist, I want the top two songs by the top 20 artists that I like.

[Michael Batnik]

That's good. That's good. All right, so where do you find the hits? How do you, how do you get these deals?

[Scott Littman]

Yeah, so I love that question. Part of that is a function of just being in the market for a long time. Part of it is a function of being in infrastructure. So infrastructure deals are really large, and because they're really large, there's always a giant capital need. You also are in a space that I view as in, if it's not this first or second inning for infra, it's the third inning or fourth inning. So there's all of these new players evolving. They're trying to do new and innovative things. They're trying to, you know, run before they can walk. They're doing all these. They've got all these great ideas. They've got no capital. Well, our resource is our capital and our willingness to work with all of them. And as a result, the phone's always ringing. There's always somebody that wants and needs a partner in a deal. Sometimes it's the biggest players in the space, sometimes it's the new entrance in the space. It doesn't matter to us because we can underwrite the asset.

[Michael Batnik]

So how do you underwrite these assets? Is this quantitative qualitative what sort of team is behind you? How does all this work? This is very, very far afield from the traditional diligencing of a traditional advisor.

[Ben Carlson]

Especially since, like you said, the deals are so big, and I guess they have to be because you're sometimes buying them from a municipality or government. Right?

[Michael Batnik]

That's right, yeah.

[Scott Littman]

I mean, these are, you know, I mean, like, we just. We just bought a small piece of a 16. We bought a $100 million piece of a $16 billion company a few weeks ago. Right. And. And so massive deal. We bought it from a pension that was looking to sell down a little piece. Great outcome for them, Great outcome for us. We were thrilled. They were thrilled. And we love those types of partnerships in that way, some of what we're doing is akin to what people will do in the public market, but we're doing it in private markets. When you go and buy a stock, you're not necessarily buying control of the company. You're buying 0.1% or 0.5%, or maybe you're even buying 5%, but it's a minority and you're having trust and faith that people know how to run the company. It's the same concept for us with the additional benefit that we have really good transparency and the ability to underwrite the asset. And there's a team full of people that comes from a background of having invested for control in their past. So lots of experience picking these assets apart and understanding what works and what doesn't.

[Michael Batnik]

So what are some of the things that you look for on, like, the negative side that you would say, yeah, nah, this is without even, like, without even doing deep diligence. This is not for us.

[Scott Littman]

Yeah. So right off the bat, we care a ton about cash flow certainty, we care a ton about Greenfield versus Brownfield. And just to kind of make that point more, more clear, new build is harder because you're necessarily taking more risk. Operating assets, brownfield assets are a lot easier to underwrite because you have operating performance, you have cash flow certainty, you have features that you can underwrite, kick the tires on and understand. So those are things that we care a lot about up front. What's really powerful when we are evaluating an opportunity, and this is, I think, one of the greatest advantages of an approach like ours, where you're doing something and you're agnostic as the source is when we look at a data center, we've probably seen a dozen different underwrites from a dozen different sponsors. And so what we can put on a page is the entry multiple and the cash flow profile and the capital structure and the growth profile and the CapEx profile and the refinancing assumptions and the exit assumptions. And you know what pops off the page? Outliers. Right. Who paid too much, who's got unreasonable assumptions as to growth, who's assuming multiple expansion at exit. And those are big no nos.

[Ben Carlson]

Yeah, but no to your point, because these are stable cash flows. You're right. It would make sense that if there's a huge outlier, then it would stick out like a sore thumb. Right. If something that if the numbers didn't make sense, then there's gotta be something wrong.

[Scott Littman]

That's exactly right. And so what you're getting is risk adjusted return, right? You're, you're seeing and you're, it sounds really easy. What's hard is aggregating the information. But once you have it, it's really valuable.

[Michael Batnik]

Scott, I feel like I have about 14 hours more of questions. This is a very interesting and new opportunity for people to access these investments. And of course, well, new, new on the, on the wealth side.

[Scott Littman]

Right.

[Michael Batnik]

Like I know this is an institutional space for a long time, but like everything else, especially things that are new and interesting, if you're listening, please make sure you do all the diligence necessary because this is very different than buying a stock or an ETF or an index or anything that we're, you know, used to doing on a day to day basis. So with that said, Scott, for people that do want to spend 14 hours with you uninterrupted and learn more about the investment opportunities and of course the risks and everything else in between, where do we send them to learn more?

[Scott Littman]

The starting point to learn more is this is a Scion Grosvenor partnership. So the Scion team, their website is a great place to get more information and that team has been in the interval fund space for a very long time. They're one of the, the, the, the most prominent players in that space. That's why we at Grosvenor partnered with them. And then of course Grosvenor and our webpage will provide you access to the infrastructure team and our platform. And we'd be happy to spend more time unpacking this. And like you Michael, we could talk about it for 14 or more hours. All right.

[Michael Batnik]

Appreciate the time, Scott.

[Scott Littman]

That was great.

[Ben Carlson]

Okay, thank you to Scott. Thank you to Science Investments. Remember to check out sign investments.com to learn more. Email us animalspiritscompoundnews.com.

[Podcast Disclaimer/Intro]

No assurance can be given that any investment will achieve its objectives or avoid losses. Certain views expressed herein are the personal opinions of the speaker and should not be taken as representing the views of the firm. To the extent this podcast contains any forward looking statements, such statements represent good faith expectations concerning future actions, events or conditions and can never be viewed as indications of whether particular actions, events or conditions will occur. Past performance is not necessarily indicative of future results.