The Weekly (1/19)

Earnings season has kicked off in earnest but it’s the private markets that have piqued our interest.

Blackrock made a splashy $12.5 billion acquisition of Global Infrastructure Partners late last week. For context: GIP is the world’s third-largest infrastructure investor, behind Australia’s Macquarie and Canada’s Brookfield and manages over $100 billion in assets. 

The purchase undoubtedly vaults the world’s biggest money manager into the top ranks of investors making bets on transportation, energy, and digital infrastructure.  

The infrastructure business as we know it today really took shape in the 1990s when Western governments who experienced ballooning debts began seeking the help of private investors to acquire and refurbish decade old infrastructure. From airports to electrical cables, water supply and railways, the privatization of public goods enabled the creation of the asset class we know today.

Blackrock’s lead man, Larry Fink, believes that the “future in private markets is in infrastructure” and the deal signals that Blackrock is now a real competitor. Blackrock isn’t the only ones who are excited about the asset class either: General Atlantic purchased Actis earlier this week in the latest sign that institutional investors are betting big on infra.

But why, in 2024, are these institutions so excited about the once sleepy asset class?

Brookfield, one of the giants we mentioned earlier, believes the recent interest is a result of ‘The Three D’s’: digitalization, deglobalization, and decarbonization. 

Software may be eating the world but it still requires infrastructure to do it. As data becomes one of the world’s fastest growing commodities, more physical assets like fiber cables and data centers are required to keep up with the digitizing world. 

As more critical infrastructure is onshored, deglobalization requires investment in physical assets. Supply chain disruptions proved that our transportation infrastructure needs to be more resilient and will require billions in capital investment. Capital can’t exclusively come from government stimulus which is where private investors will be forced to step in.

There’s a global effort to decarbonize and the path towards net-zero emissions will not come without infrastructure investment. Big ticket items like wind and solar and the related batteries will require an enormous upgrade to replace aging systems. 

The birth of infrastructure investing was when governments were burdened by debt and couldn't upgrade systems on their own. With national debt at unprecedented levels, that trend couldn’t be more true today. 

It's easy to believe that government participation in the aforementioned demand cycle may be limited, which is where infrastructure investors may be willing to fill the gap.

What does this potentially mean for Titan?

We’re constantly on the lookout for best in class investment opportunities for investors across public and private markets. Our Offshore strategy holds Vinci (VCISY) as a public proxy to the infrastructure mega trends we outlined above and we have a handful of other companies underwritten on the public side. 

Infrastructure is another slice of the investment pie that may offer compelling risk adjusted returns and we don’t expect these tailwinds to subside any time soon.

Have a great weekend,

— Your Titan Team

Disclosures:

As of writing, VCISY is a holding in Titan's Offshore strategy.